Union Effects on Product and Technological Innovation

We present theoretical and empirical evidence challenging early studies that found unions were detrimental to workplace innovation. Under our theoretical model, unions prefer product innovation to labour-saving technological process innovation, thus making union wage bargaining regimes more conducive to product innovation than competitive pay setting. We test the theory with population-representative workplace data for Britain and Norway. We find strong support for the notion that local bargaining leads to product innovation, either alone or together with technological innovation.