Hostname: page-component-89b8bd64d-z2ts4 Total loading time: 0 Render date: 2026-05-06T06:31:16.174Z Has data issue: false hasContentIssue false
  • English
  • Français

Unionization, industry concentration, and economic growth

Published online by Cambridge University Press:  29 February 2024

Colin Davis ,
Ken-ichi Hashimoto  and
Ken Tabata
Colin Davis*
Affiliation:
The Institute for the Liberal Arts, Doshisha University, Kyoto, Japan
Ken-ichi Hashimoto
Affiliation:
Graduate School of Economics, Kobe University, Kobe, Japan
Ken Tabata
Affiliation:
School of Economics, Kwansei Gakuin University, Hyogo, Japan
*
Corresponding author: Colin Davis; Email: cdavis@mail.doshisha.ac.jp
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines how unionization affects economic growth through its impact on industry concentration in a two-country model of international trade and endogenous productivity growth. Knowledge spillovers link firm-level productivity in innovation with geographic patterns of industry ensuring a faster rate of output growth when industry is relatively concentrated in the country with the greater labor supply. We show that stronger bargaining power in the relatively large country increases the rate of output growth when labor unions are employment-oriented but decreases the rate of growth when unions are wage-oriented. We then calibrate the model using labor market data for the United Kingdom and France and study the effects of union bargaining power on industry location patterns, output growth, and national welfare.

Keywords

Labor union bargaining powerindustry concentrationknowledge diffusionendogenous productivity growthendogenous market structure

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e3
Copyright
© The Author(s), 2024. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Anderson, J. and van Wincoop, E. (2004) Trade costs. Journal of Economic Literature 42(3), 691–751.CrossRefGoogle Scholar
Andolfatto, D. (1996) Business cycles and labor-market search. The American Economic Review 86(1), 112–132.Google Scholar
Baldwin, R., Forslid, R., Martin, P., Ottaviano, G. and Robert-Nicoud, R. (2003) Economic Geography and Public Policy. New Jersey: Princeton University Press.Google Scholar
Britton, E., Larsen, J. and Small, I. (2000) Imperfect competition and the dynamics of mark-ups, Bank of England Working Papers, vol. 110, Bank of England.Google Scholar
Carmeci, G. and Mauro, L. (2003) Imperfect labor market and convergence: theory and evidence in some OECD countries. Journal of Policy Modeling 25(8), 837–856.CrossRefGoogle Scholar
Chang, J. and Hung, H. (2016) Trade unions, unemployment, economic growth, and income inequality. Macroeconomic Dynamics 20(1), 404–428.CrossRefGoogle Scholar
Chang, J., Shaw, M. and Lai, C. (2007) Managerial trade union and economic growth. European Economic Review 51(2), 365–384.CrossRefGoogle Scholar
Chu, A., Cozzi, G. and Furukawa, Y. (2016) Unions, innovation and cross-country wage inequality. Journal of Economic Dynamics and Control 64(C), 104–118.CrossRefGoogle Scholar
Davis, C. and Hashimoto, K. (2014) Patterns of technology, industry concentration, and productivity growth without scale effects. Journal of Economic Dynamics and Control 40, 266–278.CrossRefGoogle Scholar
Davis, C. and Hashimoto, K. (2022) Productivity growth, industry location patterns, and labor market frictions. Regional Science and Urban Economics 97, 1–13.CrossRefGoogle Scholar
Desmet, K. and Rossi-Hansberg, E. (2009) Spatial growth and industry age. Journal of Economic Theory 144(6), 2477–2502.CrossRefGoogle Scholar
Desmet, K. and Rossi-Hansberg, E. (2014) Spatial development. American Economic Review 104(4), 1211–1243.CrossRefGoogle Scholar
Dixit, A. and Stiglitz, J. (1977) Monopolistic competition and optimum product diversity. The American Economic Review 67(3), 297–308.Google Scholar
Doucouliagos, H., Freeman, R. and Laroche, P. (2017) The Economics of Trade Unions: A Study of a Research Field and Its Findings. New York: Routledge.CrossRefGoogle Scholar
Dumont, M., Rayp, G. and Willemé, P. (2006) Does internationalization affect union bargaining power? An empirical study for five EU countries. Oxford Economic Papers 58(1), 77–102.CrossRefGoogle Scholar
Egger, H. and Etzel, D. (2014) Union wage-setting and international trade with footloose capital. Regional Science and Urban Economics 48, 56–67.CrossRefGoogle Scholar
Ethier, W. (1982) National and international returns to scale in the modern theory of international trade. The American Economic Review 72(3), 389–405.Google Scholar
Gali, J., Gertler, M. and López-Salido, D. (2007) Markups, gaps, and the welfare costs of business fluctuations. Review of Economics and Statistics 89(1), 44–59.CrossRefGoogle Scholar
Gardiner, B., Martin, R., Tyler, P. (2011) Does spatial agglomeration increase national growth? Some evidence from Europe. Journal of Economic Geography 11(6), 979–1006.CrossRefGoogle Scholar
Irmen, A. and Wigger, B. U. (2002) Trade union objectives and economic growth. FinanzArchiv, Public Finance Analysis 59(1), 49–67.CrossRefGoogle Scholar
Ji, L., Chang, J.-J. and Huang, C.-Y. (2016) Unionization, market structure, and economic growth. Southern Economic Journal 82(3), 935–951.CrossRefGoogle Scholar
Jones, L., Manuelli, R. and Rossi, P. (1993) Optimal taxation in models of endogenous growth. Journal of Political Economy 101(3), 485–517.CrossRefGoogle Scholar
Lingens, J. (2003) The impact of a unionised labour market in a Schumpeterian growth model. Labor Economics 10(1), 91–104.CrossRefGoogle Scholar
Lingens, J. (2007) Unions, wage setting, and economic growth. Economic Modelling 24(1), 167–188.CrossRefGoogle Scholar
Melo, P., Graham, D. and Noland, R. (2009) A meta-analysis of estimates of urban agglomeration economies. Regional Science and Urban Economics 39(3), 332–342.CrossRefGoogle Scholar
Merz, M. (1995) Search in the labor market and the real business cycle. Journal of Monetary Economics 36(2), 269–300.CrossRefGoogle Scholar
Montagna, C. and Nocco, A. (2013) Unionization, international integration, and selection. Canadian Journal of Economics 46(1), 23–45.CrossRefGoogle Scholar
Munch, J. (2003) The location of firms in unionized countries. Scandinavian Journal of Economics 105(1), 49–71.CrossRefGoogle Scholar
Van & Terraz (2021)Nguyen-Van, P. and Terraz, I. (2021) When union’s activity matters: the impact of union centralization on economic growth in OECD countries. Applied Economics 53(21), 2433–2446.CrossRefGoogle Scholar
Novshek, W. and Sonnenschein, H. (1987) General equilibrium with free entry: a synthetic approach to the theory of perfect competition. Journal of Economic Literature 115(3), 1281–1306.Google Scholar
Novy, D. (2013) Gravity redux: measuring international trade costs with panel data. Economic Inquiry 51(1), 101–121.CrossRefGoogle Scholar
OECD Labor Market Statistics (2023) This information is retrieved from the OECD labour market statistics: http://stats.oecd.org/.Google Scholar
OECD Productivity Statistics (2023) This information is retrieved from the OECD productivity statistics: https://doi.org/10.1787/pdtvy-data-en.CrossRefGoogle Scholar
Palokangas, T. (1996) Endogenous growth and collective bargaining. Journal of Economic Dynamics and Control 20(5), 925–944.CrossRefGoogle Scholar
Palokangas, T. (2005) International labor union policy and growth with creative destruction. Review of International Economics 13(1), 90–105.CrossRefGoogle Scholar
Pemberton, J. (1988) A ‘managerial’ model of the trade union. The Economic Journal 98(392), 755–771.CrossRefGoogle Scholar
Peretto, P. (1996) Sunk costs, market structure, and growth. International Economic Review 37(4), 895–923.CrossRefGoogle Scholar
Peretto, P. (2018) Robust endogenous growth. European Economic Review 108, 49–77.CrossRefGoogle Scholar
Persyn, D. (2013) Union wage demands with footloose firms and agglomeration forces. Regional Science and Urban Economics 43(1), 142–150.CrossRefGoogle Scholar
Picard, P. M. and Toulemonde, E. (2006) Firms agglomeration and unions. European Economic Review 50(3), 669–694.CrossRefGoogle Scholar
Ramos Parreno, J. M. and Sanchez-Losada, F. (2002) The role of unions in an endogenous growth model with human capital. Journal of Macroeconomics 24(2), 171–192.CrossRefGoogle Scholar
Shister, J. (1954) Trade-unionism, collective bargaining, and economic growth. The American Economic Review 44(2), 214–227.Google Scholar
Smulders, S. and van De Klundert, T. (1995) Imperfect competition, concentration and growth with firm-specific R&D. European Economic Review 39(1), 139–160.CrossRefGoogle Scholar
Storm, S. and Naastepad, C. W. M. (2009) Labor market regulation and productivity growth: evidence for twenty OECD countries (1984-2004. Industrial Relations 48(4), 629–654.CrossRefGoogle Scholar
Tippet, B., Onaran, ’O. and Wildauer, R. (2022) The effect of labor’s bargaining power on wealth inequality in the UK, USA, and France. The Review of Income and Wealth, forthcoming.Google Scholar
Vernon, G. and Rogers, M. (2013) Where do unions add value? Predominant organizing principle, union strength and manufacturing productivity growth in the OECD. British Journal of Industrial Relations 51(1), 1–27.CrossRefGoogle Scholar
Young, A. (1998) Growth without scale effects. Journal of Political Economy 106(1), 41–63.CrossRefGoogle Scholar
Zenou, Y. (2009) Urban Labor Economics. Cambridge: Cambridge University Press.Google Scholar