The labor market effects of trade union heterogeneity
Marco de Pinto and
Economic Modelling, 2019, vol. 78, issue C, 60-72
Empirical evidence suggests that the bargaining power of trade unions differs across firms and sectors. Standard models of unionization ignore this pattern by assuming a uniform bargaining strength. In this paper, we incorporate union heterogeneity into a Melitz (2003) type model. Union bargaining power is assumed to be firm-specific and varies with firm productivity. This framework allows us to re-analyze the labor market effects of (i) a symmetric increase in the bargaining power of all unions and (ii) trade liberalization. We show that union heterogeneity unambiguously reduces the negative employment effects of stronger unions. Firm-specific bargaining power creates a link between unionization and the entry and exit of firms, implying a reduction of the unions' expected bargaining power. Moreover, union heterogeneity constitutes an (un)employment effect of trade liberalization. If unions are most powerful in the high-productivity (low-productivity) firms, trade liberalization will increase (decrease) unemployment.
Keywords: Trade unions; Bargaining power; Firm heterogeneity; International trade; Unemployment (search for similar items in EconPapers)
JEL-codes: F1 F16 J5 (search for similar items in EconPapers)
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Working Paper: The Labor Market Effects of Trade Union Heterogeneity (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:78:y:2019:i:c:p:60-72
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