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The Labor Market Effects of Trade Union Heterogeneity

Author

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  • Marco de Pinto

    (IAAEU Trier and Trier University)

  • Jochen Michaelis

    (University of Kassel)

Abstract

Empirical evidence suggests that the bargaining power of trade unions differs across firms and sectors. Standard models of unionization ignore this pattern by assuming a uniform bargaining strength. In this paper, we incorporate union heterogeneity into a Melitz (2003) type model. Union bargaining power is assumed to be firm-specific and varies with firm productivity. This framework allows us to re-analyze the labor market effects of (i) a symmetric increase in the bargaining power of all unions and (ii) trade liberalization. We show that union heterogeneity unambiguously reduces the negative employment effects of stronger unions. Firm-specific bargaining power creates a link between unionization and the entry and exit of firms, implying a reduction of the unions' expected bargaining power. Moreover, union heterogeneity constitutes an (un)employment effect of trade liberalization. If unions are most powerful in the high-productivity (low-productivity) firms, trade liberalization will increase (decrease) unemployment.

Suggested Citation

  • Marco de Pinto & Jochen Michaelis, 2018. "The Labor Market Effects of Trade Union Heterogeneity," MAGKS Papers on Economics 201823, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201823
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    References listed on IDEAS

    as
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    Cited by:

    1. Brändle, Tobias, 2024. "Unions and Collective Bargaining: The Influence on Wages, Employment and Firm Survival," GLO Discussion Paper Series 1457, Global Labor Organization (GLO).
    2. Cheong, Juyoung & Jung, SeEun, 2021. "Trade liberalization and wage inequality: Evidence from Korea," Journal of Asian Economics, Elsevier, vol. 72(C).
    3. de Pinto, Marco & Lingens, Jörg, 2019. "The impact of unionization costs when firm-selection matters," Labour Economics, Elsevier, vol. 60(C), pages 50-63.

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    More about this item

    Keywords

    Trade Unions; Bargaining Power; Firm Heterogeneity; International Trade; Unemployment;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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