Economic Theory· 2026Q1
Quality, trade unions and selection: the impact of unionization
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- 2026year
Short summary
Increased trade union bargaining power reduces average firm quality investment, but this effect is heterogeneous: more productive firms invest less in quality, while less productive firms invest more.
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Key points
- Increased union bargaining power leads to a decrease in average quality investment at the industry level.
- More productive firms reduce their quality investment when union power increases.
- Less productive firms increase their quality investment when union power increases.
- In open economies, stronger unions reduce export quality but increase import quality.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract This paper investigates how changes in the bargaining power of trade unions affect firm-level innovation through their impact on quality investment, within a model of heterogeneous firms. In a closed economy setting, we find that an increase in union bargaining power reduces average quality investment at the industry level. However, the effect is heterogeneous across firms: more productive firms decrease their investment in quality, while less productive firms increase it. These findings are confirmed in an open economy context, where we also find that stronger union power reduces the quality of exported goods but leads to an increase in the quality of imported goods.
The authors' abstract, as published at the source. Economic Theory, 2026 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance