In its annual "2024 Economic Report of the President", the White House refers to a paper by our partner Justus Haucap (together with Christian Wey).
The paper "Unionisation Structures and Innovation Incentives" (Haucap, J. & Wey, C. (2004), The Economic Journal, Volume 114, Issue 494, March 2004, Pages C149-C165) shows how labour market policy can promote innovation through the decentralization of union structures or through non-discrimination rules.
Abstract
This paper examines how different unionisation structures affect firms’ innovation incentives and industry employment. We distinguish three modes of unionisation with increasing degree of centralisation: (1) ‘decentralisation’ where wages are determined independently at the firm‐level, (2) ‘coordination’ where one industry union sets individual wages for all firms and (3) ‘centralisation’ where an industry union sets a uniform wage rate for all firms. While firms’ investment incentives are largest under ‘centralisation’, investment incentives are non‐monotone in the degree of centralisation: ‘decentralisation’ carries higher investment incentives than ‘coordination’. Labour market policy can spur innovation by decentralising unionisation structures or through non‐discrimination rules.