Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy
|Title||Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy|
|Publication Type||Working Paper|
|Year of Publication||2018|
|Authors||G. Cardullo, M. Conti, G. Sulis|
|ISBN Number||978 88 9386 086 4|
|Keywords||Control Function, hold-up, investment, Two-Tier Bargaining, unions|
In this paper we present a search and matching model in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. The model’s main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.