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The impact of unionization costs when firm-selection matters

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  • de Pinto, Marco
  • Lingens, Jörg

Abstract

How does an increase in unionization costs, i.e. costs which arise when workers are organized by a union, affect the productivity distribution of active firms, wage inequality and welfare? In this paper, we build a model with costly, endogenous unionization, heterogeneous firms as well as free market entry/exit to analyze these questions. If unionization costs are relatively low (high), we find that an increase reduces (raises) average productivity and welfare. Additionally, we find a hump-shaped relationship between unionization costs and wage inequality. These results suggest that policies aiming at increasing unionization costs could worsen economic performance.

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  • de Pinto, Marco & Lingens, Jörg, 2019. "The impact of unionization costs when firm-selection matters," Labour Economics, Elsevier, vol. 60(C), pages 50-63.
    • Handle: RePEc:eee:labeco:v:60:y:2019:i:c:p:50-63
    DOI: 10.1016/j.labeco.2019.05.002
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    More about this item

    Keywords

    Unionization costs; Endogenous unionization; Firm-selection; Welfare; Wage inequality;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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