This paper employs a simple overlapping gener ations endogenous growth model with an R&D sector to establish a link between union bargaining power, long-run unemployment and long-run growth. The model consists of a competitive final goods sector, two intermediate goods sectors, one competitive and the other a monopoly and a competitive R&D sector. Increased union bargaining power in the monopolized intermediate-goods sector is shown to increase wages and unemployment in the sector and reduce the economyâ€™s long-run growth rate. This result is shown to hold for both closed- and open-shop unions.
|Asia Pacific School of Economics and Government, ANU
|Published - 2002