The Impact of Unionization Costs when Firm-selection Matters

Marco de Pinto () and Jörg Lingens ()
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Marco de Pinto: Institute for Labour Law and Industrial Relations in the EU, Trier University
Jörg Lingens: University of Muenster

No 201701, IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU)

Abstract: How does an increase in unionization costs, i.e. costs which arise when workers are organized by a union, affect the productivity distribution of active firms, wage inequality and welfare? In this paper, we build a model with costly, endogenous unionization, heterogeneous firms as well as free market entry/exit. If unionization costs are rel- atively low (high), we find that an increase in these costs decreases (increases) average productivity and welfare decreases (increases). Additionally, we find a hump-shaped relationship between unionization costs and wage inequality. These results suggest that policies aiming to reduce unionization could worsen economic performance.

Keywords: unionization costs; endogenous unionization; firm-selection; welfare; wage inequality (search for similar items in EconPapers)
JEL-codes: J51 L11 L16 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:iaa:dpaper:201701

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