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Unionization and unemployment rates: a re-examination of Olson's labor cartelization hypothesis

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  • William C. Gruben
  • Keith R. Phillips

Abstract

This paper presents a test of Mancur 0lson's theory of the role that labor cartelization plays in determining interregional variations in unemployment rates. In Olson's theory, the regional degree of labor cartelization contributes to interregional variations in unemployment rates. We show that Olson's theory may be validated in the context of an empirical model that accommodates not only his theory, but also a competing hypothesis due to Freeman and Medoff, as well as business-cycle and sectoral shift related explanations of interregional variations in unemployment rates. Nevertheless, our results also offer partial substantiation of the Freeman and Medoff hypothesis. According to Freeman and Medoff, the positive relation between variation in degrees of unionization and unemployment rates among geographic regions may reflect the concentration of unions in older industrial parts of the economy.
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Suggested Citation

  • William C. Gruben & Keith R. Phillips, 1988. "Unionization and unemployment rates: a re-examination of Olson's labor cartelization hypothesis," Working Papers 8807, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:8807
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    References listed on IDEAS

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    1. Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-148, March.
    2. David G. Blanchflower & Neil Millward & Andrew J. Oswald, 1989. "Unionization and Employment Behavior," NBER Working Papers 3180, National Bureau of Economic Research, Inc.
    3. Fred Lazar, 1977. "Regional Unemployment Rate Disparities in Canada: Some Possible Explanations," Canadian Journal of Economics, Canadian Economics Association, vol. 10(1), pages 112-129, February.
    4. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    5. Edward Montgomery, 1986. "Employment and unemployment effects of unions," Working Papers (Old Series) 8601, Federal Reserve Bank of Cleveland.
    6. William C. Gruben & Keith R. Phillips, 1986. "Understanding the Texas unemployment rate," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Nov, pages 17-30.
    7. Ellen R. Rissman, 1987. "Wage growth and sectoral shifts: new evidence on the stability of the Phillips curve," Staff Memoranda 87-1, Federal Reserve Bank of Chicago.
    8. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
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    Cited by:

    1. Carolyn Sherwood-Call, 1990. "Assessing regional economic stability: a portfolio approach," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 17-26.

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    Keywords

    Unemployment; Labor unions;

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