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Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models

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Abstract

We estimate the impact of union density on wages using matched employer-employee contract data for Portugal. We extend omitted variable bias decomposition procedure of Gelbach (2016) to obtain the contribution of worker, firm, and job-title heterogeneity to the union wage premium. The principal result is the dominance of the allocation or workers among firms with different wage policies. The unobserved skills of union workers have a modest impact on wages; unions do not place their members into higher job-titles along the job career hierarchy; the wage cushion enables firms to partially undo the bargained wage; and, while fringes matter, matching does not.

Suggested Citation

  • Pedro Portugal & John T. Addison, 2015. "Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models," Working Papers w201512, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201512
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    References listed on IDEAS

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    1. John T. Addison & Pedro Portugal & Hugo Vilares, 2017. "Unions and Collective Bargaining in the Wake of the Great Recession: Evidence from Portugal," British Journal of Industrial Relations, London School of Economics, vol. 55(3), pages 551-576, September.
    2. Ana Rute Cardoso & Paulo Guimarães & Pedro Portugal, 2016. "What drives the gender wage gap? A look at the role of firm and job-title heterogeneity," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 506-524.
    3. John T. Addison & Claus Schnabel (ed.), 2003. "International Handbook of Trade Unions," Books, Edward Elgar Publishing, number 2705.
    4. Addison, John T. & Portugal, Pedro & Vilares, Hugo, 2015. "Unions and Collective Bargaining in the Wake of the Great Recession," IZA Discussion Papers 8943, Institute of Labor Economics (IZA).
    5. R. Alison Felix & James R. Hines, Jr., 2009. "Corporate Taxes and Union Wages in the United States," NBER Working Papers 15263, National Bureau of Economic Research, Inc.
    6. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
    7. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
    8. Anabela Carneiro & Paulo Guimarães & Pedro Portugal, 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 133-152, April.
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    Cited by:

    1. Jose Garcia‐Louzao & Marta Silva, 2024. "Coworker networks and the labor market outcomes of displaced workers: Evidence from Portugal," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(3), pages 389-413, July.
    2. Pedro S. Martins, 2021. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 335-369, June.
    3. Alessandro Sforza, 2020. "Shocks and the Organization of the Firm: Who Pays the Bill?," CESifo Working Paper Series 8084, CESifo.
    4. Pedro Silva Martins, 2019. "The Microeconomic Impacts of Employee Representatives: Evidence from Membership Thresholds," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(4), pages 591-622, October.

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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