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Union Wage Compression And Skill Acquisition

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  • Tolga Aksoy

Abstract

In this paper, I examine the relationship between unionisation and total output in an economy with a dual labour market, heterogeneous agents, and human capital investment. My primary focus is the skill acquisition channel, through which unionization affects total output. I theoretically demonstrate that the skill premium, and thus human capital investment, is determined by the prevalence of unions in high‐ or low‐skill‐intensive sectors. In particular, if a low (high)‐skill sector is unionised, then the skill premium is higher (lower), ensuring a larger (smaller) high‐skill sector, irrespective of the unions bargaining power. To test this hypothesis, I also empirically investigate the effects of unionisation on total productivity. The results indicate that through the reallocation of labour, unionisation induces an expansion of high‐skill‐intensive sectors, while low‐skill‐intensive sectors contract.

Suggested Citation

  • Tolga Aksoy, 2019. "Union Wage Compression And Skill Acquisition," Bulletin of Economic Research, Wiley Blackwell, vol. 71(3), pages 313-341, July.
    • Handle: RePEc:bla:buecrs:v:71:y:2019:i:3:p:313-341
    DOI: 10.1111/boer.12176
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