Public sector unions and the free-rider problem

Alexander Harrison Turk

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: A model of union membership is developed for State Government employees in Iowa. The union jointly produces a public and a private good using the resources from members. Employees have the choice to contribute to the union or to free-ride on the contributions of others;A probit model is used to model union membership. Membership is model as a function of wage gains, tenure, union dues and other individual characteristics;The empirical model is estimated using data on state government employees for 1980--1992. This data has very detailed wage information. The data also contains information on the dues required for union membership. Comparable worth pay plans were implemented in 1985. This provides a quasi-exogenous shock to relative wages that are not common in the public sector;A model of quits is also developed for the Iowa state employee. This model is used to develop statistical controls for potential section bias in the membership data. The model suggests that quits are negative to wages and to tenure during the early years of employment;Union membership is found to be wage elastic. In addition, membership appears to be more responsive to idiosyncratic wage gains than wage gains that accrue to all employees. The model was also used to estimate the impact that comparable worth wage increases had on membership. Union membership appears to be price inelastic when selection bias is not controlled for. Once you control for the potential bias, it appears that union membership is unitary elastic. This is consistent with an equilibrium where revenue to the union is maximized. It does not appear that other's contributions are close substitutes for own contributions. This suggests that union contributions are, for the most part, private goods.

Date: 2000-01-01
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