Trade Union and Global Economic Growth |
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Authors: | Chung-Hui Lai |
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Affiliation: | 1. Department of Accounting , Feng Chia University , Taiwan;2. Department of International Business , Central Taiwan University of Science and Technology , Taiwan;3. Center for General Education , National Formosa University , Taiwan p9217770@gmail.com |
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Abstract: | Abstract This paper develops a simple framework for examining the role of unions in a global economy. It builds on the model of different institutions by comparing America with a flexible wage and Europe with a rigid wage (the existence of union), where the two areas are integrated via perfect capital mobility. We find the necessary condition that the degree of wage orientation of the union is larger than the firm's bargaining power and determines the positive direction on global economic growth. In addition, the effect of union's bargaining power on global economic growth is ambiguous. If the sum of the elasticity of substitution between capital and labour and the output elasticity of labour is smaller than one, or the firms are characterized by a Leontief production function (Harrod–Domar growth model) or an extremely low substituting elasticity (much empirical literature is supported), the union's bargaining power will lead to an increase in the growth of the global economy. In the general Cobb–Douglas production function (Solow–Swan neoclassical growth model), the union's bargaining power will result in a decline in the growth of the global economy. |
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Keywords: | Union right-to-manage bargaining overlapping generations economic growth |
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