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The Role of Bargaining Power: How Unions Affect Income Distribution

Vincent Victor

No 6, Potsdam Economic Papers from Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät

Abstract: Neoclassical theory omits the role of bargaining power in the determination of wages. As a result, the importance of changes in the bargaining position for the development of income shares in the last decades is underestimated. This paper presents a theoretical argument why collective bargaining power is a main determinant of workers’ share of income and how its decline contributed to the severe changes in the distribution of income since the 1980s. In order to confirm this hypothesis, a panel data regression analysis is performed that suggests that unions significantly influence the distribution of income in developed countries.

Keywords: bargaining power; collective bargaining; income distribution; macroeconomics; unions; wages (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-hme and nep-pke
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