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What do unions do (to nonunion workers)?

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  • Ruiz-Verdú, Pablo

Abstract

This paper develops a model of wage and employment determination under the threat of unionization. The model shows that this threat generally leads nonunion firms to pay higher than competitive wages and to set a level of employment equal to or higher than the competitive employment level. This result holds independently of the model used to represent union-management bargaining, as long as it exhibits an intuitively appealing trade-off between wages and employment (monotonicity). The right-to-manage and the Nash-bargaining models are shown to be monotone, so the result extends to the most commonly used models of unionmanagement bargaining.

Suggested Citation

  • Ruiz-Verdú, Pablo, 2004. "What do unions do (to nonunion workers)?," DEE - Working Papers. Business Economics. WB wb040202, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    • Handle: RePEc:cte:wbrepe:wb040202
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    References listed on IDEAS

    as
    1. Kai-Uwe Kuuhn & A. Jorge Padilla, 2002. "Union Power, Replacement and Labour Market Dynamics," Economic Journal, Royal Economic Society, vol. 112(479), pages 317-343, April.
    2. Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, vol. 5(5), pages 742-747, November.
    3. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, January.
    4. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
    5. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 3-39, June.
    6. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, January.
    7. Alison L. Booth, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 253-261.
    8. S. Rosen, 1969. "Trade Union Power, Threat Effects and the Extent of Organization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(2), pages 185-196.
    9. Corneo, Giacomo, 1995. "Social custom, management opposition, and trade union membership," European Economic Review, Elsevier, vol. 39(2), pages 275-292, February.
    10. Naylor, Robin & Raaum, Oddbjorn, 1993. "The Open Shop Union, Wages, and Management Opposition," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 589-604, October.
    11. repec:cup:macdyn:v:5:y:2002:i:05:p:742-747_03 is not listed on IDEAS
    12. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 375-410.
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