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What Determines Union Density? A Political Economy Model of the Labor Market with Empirical Evidence in the Context of European Countries

Author

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  • Michael Ollinger

    (Universitat der Bundeswehr Munchen / Bundeswehr University Munich Institut fur Controlling, Finanz- und Risikomanagement, GERMANY)

  • Friedrich L. Sell

    (Universitat der Bundeswehr Munchen / Bundeswehr University Munich Institut fur Okonomie und Recht der globalen Wirtschaft, GERMANY)

Abstract

In this investigation, a political economy model of the labor market is proposed, where unions offer their (old and new) affiliates the combinations between the average real wage level and the standard deviation of wages or salaries. Globalization and other forces, however, have made it recently more difficult for the unions to pursue their policy in the backdrop of a declining union density. This has been established empirically for selected European countries. In an econometric exercise, we have also tested directly the impact of changes in real wages, minimum wage rate, and the effect of 90 to 10 decile ratio on the change in the degree of affiliation, which the unions were able to achieve in the recent past. We show empirically for a sample of European countries that unions can be either rewarded for their achievements or incentived to correct adverse developments in the labor market.

Suggested Citation

  • Michael Ollinger & Friedrich L. Sell, 2017. "What Determines Union Density? A Political Economy Model of the Labor Market with Empirical Evidence in the Context of European Countries," Review of Economics & Finance, Better Advances Press, Canada, vol. 10, pages 18-32, November.
    • Handle: RePEc:bap:journl:170402
    Note: The authors wish to thank Reinhard Neck, Thorvaldur Gylfason and the other participants of the session ¡°Economic Policy: Institutions, Political Economy, and Quantitative Economic Policy¡± as part of the 83rd International Atlantic Economic Conference, held in Berlin, March 22 through 25, 2017. We appreciate most valuable comments given by two anonymous referees.
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    References listed on IDEAS

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    Cited by:

    1. Friedrich L. Sell, 2021. "Flexibles Inflationsziel für die Geldpolitik: nur neuer Wein in alten Schläuchen? [Flexible Inflation Target for Monetary Policy]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(1), pages 58-62, January.
    2. Öllinger, Michael & Ostermair, Christoph & Sell, Friedrich L., 2019. "Distributional effects of minimum wages: Can unions expect a double dividend? A theoretical exercise from a supply-side view," Working Papers in Economics 2019,2, Bundeswehr University Munich, Economic Research Group.

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    More about this item

    Keywords

    Political Economy of the labor market; Union density; Wage dispersion; Average wage; Minimum wage;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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