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Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models

John Addison (), Pedro Portugal and Hugo de Almeida Vilares ()

No 5, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: We estimate the impact of union density on wages using Portuguese matched employer-employee-contract data, extending Gelbach’s (2016) omitted variable bias decomposition procedure to obtain the contribution of worker, firm, and job-title heterogeneity to the union wage premium. The principal result is the dominance of the firm fixed effect: the allocation of workers among firms with different wage policies. For their part, the unobserved skills of union workers have only a modest impact on wages. In turn, job titles reflect the average contract in the collective agreement, while the wage cushion offers firms a margin of flexibility, partially undoing increases in the bargained wage. Finally, there is little to suggest that the union wage gap is influenced by improved match quality.

Keywords: union density; union wage gap; total compensation; bargained wages; wage cushion; wage supplements; worker/firm/job-title fixed effects; Gelbach decomposition (search for similar items in EconPapers)
JEL-codes: J31 J33 J41 J51 J52 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eur and nep-ltv
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https://www.econstor.eu/bitstream/10419/152322/1/GLO_DP_0005.pdf (application/pdf)

Related works:
Working Paper: Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models (2015) Downloads
Working Paper: Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models (2015) Downloads
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