Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms

29 Pages Posted: 19 Jul 2010

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: July 2010

Abstract

We analyse how different labour market institutions - employment protection versus flexicurity - affect technology adoption in unionised firms. We consider trade unions incentives to oppose or endorse labour-saving technology and firms incentives to invest in such technology. Increased flexicurity - interpreted as less employment protection and a higher reservation wage for workers - unambiguously increases firms incentives for technology adoption. If unions have some direct influence on technology, 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: Employment protection, Flexicurity, Technology adoption, Trade unions

JEL Classification: J38, J51, O33

Suggested Citation

Lommerud, Kjell Erik and Straume, Odd Rune, Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms (July 2010). CEPR Discussion Paper No. DP7919, Available at SSRN: https://ssrn.com/abstract=1640995

Kjell Erik Lommerud (Contact Author)

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

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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