Publication

This paper studies how different unionization structures affect firm productivity and firm performance in a monopolistic competition model with heterogeneous firms and free entry. While centralized bargaining induces tougher selection among heterogeneous producers and thus increases average productivity, firm-level bargaining allows less productive entrants to remain in the market. Centralized bargaining also results in higher average output and profit levels than either decentralized bargaining or a competitive labor market. From the perspective of consumers, the choice between centralized and decentralized bargaining involves a potential trade-off between product variety and product prices.