The Impact of Unionization Costs when Firm-selection Matters
Marco de Pinto () and
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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)
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)
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Persistent link: https://EconPapers.repec.org/RePEc:iaa:dpaper:201701
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