Economics at your fingertips  

The Union Threat

Mathieu Taschereau-Dumouchel ()

No 434, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the impact of unions on wage inequality, output and unemployment. To do so, it proposes a search and matching model of union formation in which unions arise endogenously through a voting process within firms. In a union firm, workers bargain their wages collectively. In a nonunion firm, each worker bargains individually with the firm. Because of this wage setting asymmetry, a union lowers the profit of a firm and compresses the wage distribution of the workers. Furthermore, to prevent unionization, nonunion firms distort their hiring decisions in a way that also lowers the dispersion of wages. After being calibrated on the United States, the model shows that, even though a partial equilibrium estimate would predict a small impact of unions on inequality, removing the threat of unionization increases the variance of wages substantially. Completely outlawing unions increases wage inequality further. Also, outlawing unions increases welfare and output, and lowers unemployment. These results suggest that, even with a small membership, unions might have a significant impact on the economy through general equilibrium mechanisms and the way they distort firms' decisions.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

Page updated 2020-09-03
Handle: RePEc:red:sed011:434