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Purpose - The purpose of this paper is to theoretically investigate the impact of wage pacts on economic growth. Design/methodology/approach - This paper presents an innovation driven endogenous growth model, where firms and unions bargain over wages. Findings - Finds that the degree of centralization of the bargaining structure plays a crucial rule for economic performance. Central bargaining, which incorporates the leapfrogging externality incorporated in firm-level bargaining, will yield lower rates of unemployment for a given rate of economic growth. The increase in labor resources will in turn also yield faster growth rates in a corporatist economy. Indeed, when unions focus on issues other than short term wage increases, they may even outperform the non-unionized economy, as they can internalize the knowledge externality through long-term wage moderation pacts. Research limitations/implications - The paper is theoretical with some anecdotal evidence, and lacks thorough empirical testing. Practical implications - There are strong implications for economic policy, suggesting the promotion of wage pacts. Before implementation, prior empirical conformation of the results is required. Originality/value - This is the first paper that demonstrates under which conditions unions can promote economic growth and reduce unemployment through long-term wage pacts. [ABSTRACT FROM AUTHOR]

This paper analyses, estimates, and compares four prototypic models of innovation, from a simple technological model to an elaborated institutional model that includes financial, organizational and technological variables. The comparison of the four models shows that institutions, in particular the national system of innovation, and organizations matter. Networks and information flows from different economic actors add to the explanatory power and give the best model fit. The empirical analysis is based on the second Community Innovation Survey Studies (CIS II) of the European Union. [ABSTRACT FROM AUTHOR]

Several distinctive stylized facts form the new economy, an information technology service sector organized in network forms of organization, an inflation rate below its fundamentals, an increase in stock market volatility, high rates of economic growth, but apart from a small information technology manufacturing sector low productivity rates. This paper presents a model where the innovation of new service varieties can explain all of these facts. First, productivity gains are no longer realized within but between firms, as the increase in variety increases value-added per employee. Whilst service innovators, such as the information technology manufacturers, get ever more productive, individual service firms will exhibit low productivity. It is this unmeasured sectoral productivity gain, which is the key element in understanding the intrinsic inertia in the price index. Finally, the paper shows that variety in the service sector enables service providers to realize rents, where fluctuations of these rents are the basis of more than proportional changes in the firms'' stock market value. [Copyright &y& Elsevier]