Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy

TitleUnions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy
Publication TypeWorking Paper
Year of Publication2018
AuthorsG. Cardullo, M. Conti, G. Sulis
Number2018_12
ISBN Number978 88 9386 086 4
KeywordsControl Function, hold-up, investment, Two-Tier Bargaining, unions
Abstract

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.

Citation Key7200
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