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Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms *
Author(s) -
Lommerud Kjell Erik,
Straume Odd Rune
Publication year - 2012
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2011.01663.x
Subject(s) - flexicurity , incentive , labour economics , reservation , reservation wage , employment protection legislation , economics , wage , technological change , job loss , business , unemployment , market economy , economic growth , political science , law , macroeconomics
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, as this increases the downside (job losses) of labour‐saving technology.