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Luca Gori and Luciano Fanti
''Right-to-manage unions endogenous growth and welfare ''
( 2009, Vol. 29 No.2 )
Using the basic overlapping generations one-sector model of endogenous growth we show that unionisation of labour markets may be growth-enhancing with respect to the standard competitive equilibrium economy with full employment, provided the capital's weight in technology and the replacement rate are both high enough. Moreover, a growth-maximising value of the union''s relative wage intensity does exist. In particular, a wage-oriented rather than an employment-oriented union should be preferred as an inducement to a higher per capita income growth. Therefore, an appropriate combination of both union''s behaviour and government policies may trigger a virtuous growth mechanism. A policy implication is that the government could follow the union''s growth-maximising rule simply by choosing properly the replacement rate. Moreover, along the balanced growth path, individuals can be better off in a unionised economy with unemployment rather than in the competitive economy with full employment.
Keywords: Endogenous growth
JEL: O4 - Economic Growth and Aggregate Productivity: General
J6 - Mobility, Unemployment, and Vacancies: General
Manuscript Received : Nov 09 2008 Manuscript Accepted : May 08 2009

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