Unions, Wage Setting, and Economic Growth

In this paper we analyse the growth eects of union wage bargain-ing within an expanding product variety growth model. We identify two channels via which unionisation will aect the rate of growth. Firstly, unions capture monopoly prots and thus give rise to a hold-up problem. Firms have less incentive to invest into research. This c.p. dampens the rate of growth. Secondly, unionisation changes the "de facto " skill abundance of the economy. This results in a resource reallocation a la Rybczynski which might be growth enhancing. We derive conditions for the dominance of either eect and demonstrate how these will change with the institutional setting of the bargain