Training and Product Quality in Unionized Oligopolies

In this paper we analyse the private and public incentives towards skill acquisition when the skill level of workers determines the quality level of goods, and both labour and product markets are non-competitive. We show that both ‘pure’ (set by either firms or unions only) and ‘mixed’ (set by firms and unions) training scenarios may emerge at equilibrium. We show that firms have generally greater training incentives than unions, resulting in a higher product quality. Our welfare analysis shows that both unions and firms underinvest in training in comparison with the social optimum.