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What Determines Union Density? A Political Economy Model of the Labor Market with Empirical Evidence in the Context of European Countries

Michael Ollinger () and Friedrich L. Sell ()
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Michael Ollinger: Universitat der Bundeswehr Munchen / Bundeswehr University Munich Institut fur Controlling, Finanz- und Risikomanagement, GERMANY
Friedrich L. Sell: Universitat der Bundeswehr Munchen / Bundeswehr University Munich Institut fur Okonomie und Recht der globalen Wirtschaft, GERMANY

Review of Economics & Finance, 2017, vol. 10, 18-32

Abstract: In this investigation, a political economy model of the labor market is proposed, where unions offer their (old and new) affiliates the combinations between the average real wage level and the standard deviation of wages or salaries. Globalization and other forces, however, have made it recently more difficult for the unions to pursue their policy in the backdrop of a declining union density. This has been established empirically for selected European countries. In an econometric exercise, we have also tested directly the impact of changes in real wages, minimum wage rate, and the effect of 90 to 10 decile ratio on the change in the degree of affiliation, which the unions were able to achieve in the recent past. We show empirically for a sample of European countries that unions can be either rewarded for their achievements or incentived to correct adverse developments in the labor market.

Keywords: Political Economy of the labor market; Union density; Wage dispersion; Average wage; Minimum wage (search for similar items in EconPapers)
JEL-codes: J51 D72 J31 O15 (search for similar items in EconPapers)
Date: 2017
Note: The authors wish to thank Reinhard Neck, Thorvaldur Gylfason and the other participants of the session ¡°Economic Policy: Institutions, Political Economy, and Quantitative Economic Policy¡± as part of the 83rd International Atlantic Economic Conference, held in Berlin, March 22 through 25, 2017. We appreciate most valuable comments given by two anonymous referees.
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Handle: RePEc:bap:journl:170402