The Union Threat

Mathieu Taschereau-Dumouchel

The Review of Economic Studies, 2020, vol. 87, issue 6, 2859-2892

Abstract: This article develops a search theory of labour unions in which the possibility of unionization distorts the behaviour of non-union firms. In the model, unions arise endogenously through a majority election within firms. As union wages are set through a collective bargaining process, unionization compresses wages and lowers profits. To prevent unionization, non-union firms over-hire high-skill workers— who vote against the union— and under-hire low-skill workers— who vote in its favour. As a consequence of this distortion in hiring, firms that are threatened by unionization hire fewer workers, produce less and pay a more concentrated distribution of wages. In the calibrated economy, the threat of unionization has a significant negative impact on aggregate output, but it also reduces wage inequality.

Keywords: Labor unions; Trade unions; Macroeconomic impact of unions; Workplace conflict; Strike; J50; J41; E24 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Working Paper: The Union Threat (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:87:y:2020:i:6:p:2859-2892.

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