Basak, Debasmita Hoefele, Andreas Mukherjee, Arijit
Year of Publication:
CESifo Working Paper 5007
We show the effects of the bargaining power of labour unions on product innovation under decentralised and centralised wage bargaining. In this context, we show the implications of preference function, which affects the market size. A higher union bargaining power increases innovation if bargaining is decentralised, the market expansion effect is weak and the cost of innovation is moderate but low. Otherwise, a higher union bargaining power reduces innovation. Hence, whether a higher union bargaining power increases or decreases product innovation depends on the type of wage bargaining, market expansion effect and the cost of innovation.
centralised union decentralised union product innovation union utility