DP874 | Employment, Innovation and Union Bargaining Models: New Tests and Evidence from UK Manufacturing Firms


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This paper investigates the impact of innovation on employment using a panel of UK manufacturing firms and a headcount measure of innovations. It focuses on unionized firms and outlines a methodology for testing between various types of union bargaining models. It also argues that the innovation effect can be used to distinguish between shirking models and union bargains. Innovation is found to have positive effect on company employment raising it by 9--12% in the short run and up to 40% in the long run. Furthermore, although the data cannot reject a labour demand model, firms with stronger unions have higher employment growth from new products and processes.