Firm Selection and the Role of Union Heterogeneity

Marco de Pinto () and Jochen Michaelis ()
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Marco de Pinto: IAAEU Trier and Trier University

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: Empirical evidence suggests that high-productivity firms face stronger trade unions than low-productivity firms. Then a policy that puts all unions into a better bargaining position is no longer neutral for firm selection as in models with a uniform bargaining strength across firms. Using a Melitz-type model, we show that firm selection becomes less severe. Since more low-productivity firms enter the market, the negative employment effect of unionization is mitigated. Neglecting inter-union differences in bargaining power leads to an overestimation of the negative labor market effects. However, trade liberalization increases unemployment because firms with the least powerful labor unions have to leave the market.

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)
Pages: 32 pages
Date: 2017
New Economics Papers: this item is included in nep-cta, nep-int and nep-lab
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Working Paper: Firm Selection and the Role of Union Heterogeneity (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201743

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