The Impact of Product Market Competition on Employment Determination in Unionised and Non-Unionised Firms: Firm Level Evidence for the U.K. |
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Authors: | Konings Jozef Walsh Patrick Paul |
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Institution: | (1) LICOS, Centre for Transition Economics, Economics Department, Katholieke Universiteit Leuven, Belgium;(2) CEPR, London, U.K.;(3) Department of Economics, Trinity College, Dublin, Ireland;(4) LICOS, Centre for Transition Economics, Katholieke Universiteit Leuven, Belgium |
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Abstract: | In this paper we investigate the effect of increasedcompetition on employment inunionised andnon-unionised firms. We model product and labourmarket imperfections, and their interactions, in Nashequilibrium. The model predicts that employment lossin unionised firms in the face of increasedcompetition will be lower compared with non-unionisedfirms. This paradoxical outcome results from anoffsetting beneficial employment effect ofcompetition, which eliminates wage mark-ups inunionised firms. We find empirical support for thetheoretical prediction using U.K. firm level data overthe period 1985–1989. |
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Keywords: | employment dynamics unionised and non-unionised firms |
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