The Labor Market Effects of Trade Union Heterogeneity
Marco de Pinto () and
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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)
Empirical evidence suggests that the bargaining power of trade unions differs across firms and sectors. Standard models of unionization ignore this pattern by assuming a uniform bargaining strength. In this paper, we incorporate union heterogeneity into a Melitz (2003) type model. Union bargaining power is assumed to be firm-specific and varies with firm productivity. This framework allows us to re-analyze the labor market effects of (i) a symmetric increase in the bargaining power of all unions and (ii) trade liberalization. We show that union heterogeneity unambiguously reduces the negative employment effects of stronger unions. Firm-specific bargaining power creates a link between unionization and the entry and exit of firms, implying a reduction of the unions' expected bargaining power. Moreover, union heterogeneity constitutes an (un)employment effect of trade liberalization. If unions are most powerful in the high-productivity (low-productivity) firms, trade liberalization will increase (decrease) unemployment.
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: 40 pages
New Economics Papers: this item is included in nep-lab
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Journal Article: The labor market effects of trade union heterogeneity (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201823
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