A “Managerial” Trade Union and Economic Growth

Abstract

By setting up a simple Romer-type (1989) endogenous growth model embodying a political trade union (rather than the traditional economic labor union), this paper explores the effects of unionization on unemployment, growth and welfare by highlighting the essence of internal conflict within the union. It is shown that the conflicting interests between the leadership and membership within the union play a decisive role in the unemployment, growth and welfare effects of unionization. Given the fact that taxation, besides unions, is another potential candidate in explaining the poor performance of employment and economic growth, we re-examine the taxation effects within the growth model with equilibrium unemployment caused by the presence of the trade union and compare our findings with those for the traditional full-employment growth model. In addition, the dynamic properties of the unionized economy are also examined, with particular emphasis being placed on the role of the trade union in the formation of equilibrium indeterminacy.Managerial trade union, collective bargaining, unemployment, economic growth