Innovation, rent-sharing and the organization of labour in the federal republic of Germany

Rent seeking by unions may inhibit various kinds of investment, particularly R&D, and unionization is often negatively related to innovation across industries. Formal organization and collective bargaining may also reduce the flexibility of work organization, and hence inhibit innovation. In a sample of small- and medium-sized firms in the FRG metal-working industry, a measure of organized labour was negatively related to product innovation, but there was little evidence for rent-seeking in simultaneous estimates.

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