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Unions and income inequality: a heterogenous cointegration and causality analysis

Dierk Herzer

No 146/2014, Working Paper from Helmut Schmidt University, Hamburg

Abstract: Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long-run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel cointegration techniques, we find that (i) unions have, on average, a negative long-run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in about a third of cases the effect is positive), and (iii) long-run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.

Keywords: unions; income inequality; cross-country heterogeneity; causality; panel cointegration (search for similar items in EconPapers)
JEL-codes: C23 D31 J51 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2014-07-03
New Economics Papers: this item is included in nep-lab and nep-pke
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