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A model of unions, two-tier bargaining and capital investment

Author

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  • Cardullo, Gabriele
  • Conti, Maurizio
  • Sulis, Giovanni

Abstract

In this paper we present a search and matching model with unions in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. In two-tier schemes wages depend on the labour productivity at firm level. This reduces the expected duration of a vacancy for capital intensive firms, as they attract a larger number of job seekers. Capital remains unused for less time, boosting investment in the first place. The model’s main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.

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  • Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2020. "A model of unions, two-tier bargaining and capital investment," Labour Economics, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:labeco:v:67:y:2020:i:c:s0927537120301408
    DOI: 10.1016/j.labeco.2020.101936
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    2. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    3. Gabriele Cardullo & Maurizio Conti & Andrea Ricci & Sergio Scicchitano & Giovanni Sulis, 2024. "On the emergence of cooperative industrial and labour relations," British Journal of Industrial Relations, London School of Economics, vol. 62(3), pages 568-590, September.
    4. Guendalina Anzolin & Chiara Benassi & Armanda Cetrulo, 2024. "Industrial relations and firm-level innovation. A comparative analysis of establishment data in Germany and Italy," LEM Papers Series 2024/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Bernardo Fanfani & Claudio Lucifora & Daria Vigani, 2024. "Employer associations in Italy: Trends and economic outcomes," British Journal of Industrial Relations, London School of Economics, vol. 62(2), pages 206-232, June.
    6. Simonetti, Irene & Belloni, Michele & Farina, Elena & Zantomio, Francesca, 2022. "Labour market institutions and long term adjustments to health shocks: Evidence from Italian administrative records," Labour Economics, Elsevier, vol. 79(C).
    7. Giovanni Sulis & Gabriele Cardullo, 2023. "Unions and investment in intangible capital," IZA World of Labor, Institute of Labor Economics (IZA), pages 201-201, May.

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    More about this item

    Keywords

    Unions; Investment; Hold-up; Two-Tier Bargaining;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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