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Unions and Wage Insurance

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  • Burda, Michael C

Abstract

Existing theories of unions emphasize their impact on wage levels relative to the opportunity cost of leisure. This paper explores the possibility that monopoly unions provide income insurance against idiosyncratic wage variability. An optimal union contract is characterized by real wage and other types of flexibility only in response to systematic changes in underlying uncertainty. Under such conditions, there is no presumption that the `union wage premium' relative to the free market wage is positive. The model shows the effect of unemployment benefits, average productivity, and risk on the desirability of union membership, and offers an economic interpretation of equity and solidarity in union policy. It can also explain the negative correlation between inequality and unionism in developed countries.

Suggested Citation

  • Burda, Michael C, 1995. "Unions and Wage Insurance," CEPR Discussion Papers 1232, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1232
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    Cited by:

    1. Checchi, Daniele & Visser, Jelle & van de Werfhorst, Herman G., 2007. "Inequality and Union Membership: The Impact of Relative Earnings Position and Inequality Attitudes," IZA Discussion Papers 2691, Institute of Labor Economics (IZA).
    2. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
    3. Fitzenberger, Bernd & Kohn, Karsten, 2005. "Gleicher Lohn für gleiche Arbeit? : zum Zusammenhang zwischen Gewerkschaftsmitgliedschaft und Lohnstruktur in Westdeutschland 1985-1997 (Equal pay for equal work? * on the relationship between union m," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 125-146.
    4. Vogel, Thorsten, 2007. "Union wage compression in a Right-to-Manage model," SFB 649 Discussion Papers 2007-009, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    5. John DiNardo & Kevin Hallock & Jorn-Steffen Pischke, 1997. "Unions and Managerial Pay," NBER Working Papers 6318, National Bureau of Economic Research, Inc.
    6. Nicole Gürtzgen, 2006. "The Effect of Firm- ans Industry-Level Contracts on Wages: Evidence from Longitudinal Linked Employer-Employee Data," ZEW Discussion Papers 06-082, ZEW - Leibniz Centre for European Economic Research.
    7. Michael C. Burda, 2001. "European Labour Markets and the Euro: How Much Flexibility Do We Really Need?," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 7, pages 252-282, Palgrave Macmillan.
    8. Bernd Fitzenberger & Karsten Kohn & Alexander C. Lembcke, 2013. "Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany," ILR Review, Cornell University, ILR School, vol. 66(1), pages 169-197, January.
    9. Agell Jonas, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, De Gruyter, vol. 3(2), pages 107-135, May.
    10. Céline Azémar & R. Glenn Hubbard, 2015. "Country characteristics and the incidence of capital income taxation on wages: An empirical assessment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(5), pages 1762-1802, December.
    11. Lindbeck, Assar, 1998. "Swedish Lessons for Post-Socialist Countries," Working Paper Series 498, Research Institute of Industrial Economics.
    12. Agell, J., 2000. "On the Determinants of Labour Market Institutions: Rent-sharing vs. Social Insurance," Papers 2000:16, Uppsala - Working Paper Series.
    13. Laszlo Goerke & Markus Pannenberg, 2012. "Risk Aversion and Trade‐Union Membership," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 275-295, June.
    14. repec:hum:wpaper:sfb649dp2007-009 is not listed on IDEAS
    15. Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June.
    16. Kohn, Karsten & Lembcke, Alexander C., 2007. "Wage Distributions by Bargaining Regime: Linked Employer-Employee Data Evidence from Germany," IZA Discussion Papers 2849, Institute of Labor Economics (IZA).
    17. Mertens Antje, 2002. "Regional and Industrial Wage Dynamics in West Germany and the United States / Regionale und industrielle Lohndynamik in Westdeutschland und den USA," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(5), pages 584-608, October.
    18. Fitzenberger, Bernd & Kohn, Karsten, 2005. "Gleicher Lohn für gleiche Arbeit? : zum Zusammenhang zwischen Gewerkschaftsmitgliedschaft und Lohnstruktur in Westdeutschland 1985-1997 (Equal pay for equal work? * on the relationship between union m," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 125-146.
    19. Berthold, Norbert & Zenzen, Jupp, 2009. "Stochern im Nebel: der Ungleichheit auf der Spur," Discussion Paper Series 104, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    20. Nicole Guertzgen, 2009. "Rent‐sharing and Collective Bargaining Coverage: Evidence from Linked Employer–Employee Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 323-349, June.
    21. Fitzenberger, Bernd & Kohn, Karsten, 2005. "Gleicher Lohn für gleiche Arbeit? : zum Zusammenhang zwischen Gewerkschaftsmitgliedschaft und Lohnstruktur in Westdeutschland 1985-1997 (Equal pay for equal work? * on the relationship between union m," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 125-146.
    22. Karsten Kohn & Alexander Lembcke, 2007. "Wage distributions by bargaining regime," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 1(3), pages 247-261, December.

    More about this item

    Keywords

    Implicit Contracts; Insurance; Labour Unions; Wage Differentials;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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