Employment Protection versus Flexicurity: On Technology Adoption in Unionised Firms

28 Pages Posted: 3 Dec 2008

See all articles by Kjell Erik Lommerud

Kjell Erik Lommerud

University of Bergen - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: November 2008

Abstract

We analyse how different labour market institutions - employment protection versus flexicurity - affect technology adoption in unionised firms. We consider both trade unions' incentives to oppose or endorse labour-saving technology, and firms' incentives to invest in such technology. We find that increased flexicurity - interpreted as less employment protection and a higher reservation wage for workers - unambiguously increase firms' incentives for technology adoption, even when taking into account the response in unionised wage setting to such new technology. If we assume that unions have some direct influence over the technology to be adopted, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, since this increases the downside (job losses) of labour-saving technology.

Keywords: technology adoption, trade unions, employment protection, flexicurity

JEL Classification: J51, O33

Suggested Citation

Lommerud, Kjell Erik and Straume, Odd Rune, Employment Protection versus Flexicurity: On Technology Adoption in Unionised Firms (November 2008). CESifo Working Paper Series No. 2472, Available at SSRN: https://ssrn.com/abstract=1310052

Kjell Erik Lommerud

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway
+47 5 558 9209 (Phone)
+47 5 558 9210 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Odd Rune Straume (Contact Author)

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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