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Labour Market Regulation, Productivity-Improving R&D and Endogenous Growth

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  • Palokangas, Tapio K.

    (University of Helsinki)

Abstract

We present a growth model in which R&D increases productivity, union-firm bargaining determines the distribution of rents and the government can support unions by labour market regulation. We show that if unions are initially very strong, regulation increases only the workers’ profit share and has no impact on employment and growth. Otherwise, regulation increases wages. Because firms try to escape this cost increase through the improvement of productivity by R&D, the economy grows faster. Regulation (deregulation) is desirable when the growth rate is below (above) some critical level.

Suggested Citation

  • Palokangas, Tapio K., 2003. "Labour Market Regulation, Productivity-Improving R&D and Endogenous Growth," IZA Discussion Papers 720, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp720
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    References listed on IDEAS

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    8. Palokangas,Tapio, 2010. "Labour Unions, Public Policy and Economic Growth," Cambridge Books, Cambridge University Press, number 9780521144056, January.
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    Cited by:

    1. Tapio Palokangas, 2004. "Union–Firm Bargaining, Productivity Improvement and Endogenous Growth," LABOUR, CEIS, vol. 18(2), pages 191-205, June.
    2. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2014. "Unionised labour market, efficiency wage and endogenous growth," MPRA Paper 58332, University Library of Munich, Germany.
    3. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2020. "Union, Efficiency of Labour and Endogenous Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 61(2), pages 170-202, December.
    4. Renato BALDUCCI & Stefano STAFFOLANI, 2003. "Short-Run Bargaining, Factors Shares and Growth," Working Papers 188, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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    More about this item

    Keywords

    regulation; labour unions; endogenous growth;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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