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The impact of unionization costs when firm-selection matters

Marco de Pinto and Jörg Lingens

Labour Economics, 2019, vol. 60, issue C, 50-63

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 to analyze these questions. If unionization costs are relatively low (high), we find that an increase reduces (raises) average productivity and welfare. Additionally, we find a hump-shaped relationship between unionization costs and wage inequality. These results suggest that policies aiming at increasing unionization costs 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: 2019
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DOI: 10.1016/j.labeco.2019.05.002

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