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A Simple Model of Holdup, Union Voice, and Firm Investments

Fabio Berton

Stefano Dughera

Andrea Ricci

Workplace Productivity and Management Practices

ISBN: 978-1-80117-675-0, eISBN: 978-1-80117-674-3

Publication date: 7 December 2021

Abstract

In this chapter, we propose a theoretical assessment of the relationship between unions and investments. We develop a simple model where a firm chooses its investment level anticipating the employee's effort choice and the outcome of wage bargaining. First, and consistently with the holdup view, we find that the union's bargaining power has a negative effect on the accumulation of fixed capital. Second, we show that this negative effect is mitigated by the voice ability of unions to ease the displeasure of exerting effort. Hence, when the voice ability of unions is strong vis-à-vis their bargaining power, the holdup view does not necessarily survive, and unionized firms invest more than their nonunionized competitors.

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Acknowledgements

Acknowledgment

We thank Matteo Bocchi, Laszlo Goerke, Olga Zacharopoulou, and two anonymous referees for their helpful insights. We also thank the participants to the second Astril Conference (University of Rome) and to the 11th Workshop in Labor Economics (IAAEU, University of Trier) for their comments. The opinions expressed here reflect only the authors' views and not their institutions'. The INAPP is not responsible for any use that can be made of the present results. Further usual disclaimers apply. Corresponding author: Fabio Berton, University of Turin, Department of Economics and Statistics, Lungo Dora Siena 100/A – 10153 Torino, Italy (fabio.berton@unito.it).

Citation

Berton, F., Dughera, S. and Ricci, A. (2021), "A Simple Model of Holdup, Union Voice, and Firm Investments", Polachek, S.W., Tatsiramos, K., Russo, G. and van Houten, G. (Ed.) Workplace Productivity and Management Practices (Research in Labor Economics, Vol. 49), Emerald Publishing Limited, Leeds, pp. 67-84. https://doi.org/10.1108/S0147-912120210000049003

Publisher

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Emerald Publishing Limited