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The union membership wage-premium puzzle: Is there a free rider problem?

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Author Info
Alison L. Booth
Mark L. Bryan

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Abstract

Economists have long suggested that labor unions suffer a free rider problem. The argument is that, since union-set wages are available to all workers covered by unions irrespective of their union status, and union membership entails costs, workers will only join if they are coerced or are offered non-wage goods that they value above membership costs. Yet U.S. and British empirical research has found a substantial union membership wage premium among private-sector union-covered workers, implying that there is no free rider problem. The authors of this study hypothesize that these findings arise due to selectivity problems associated with identifying the union membership effect. Their analysis, which uses rich data from a new linked employer-employee survey for Britain and exploits the within-establishment variation in wages as a function of individual union membership status, demonstrates that the apparent wage premium for members is illusory. Hence, a potential free rider problem remains. (Author's abstract.) (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Article provided by ILR Review, ILR School, Cornell University in its journal ILR Review.

Volume (Year): 57 (2004)
Issue (Month): 3 (April)
Pages: 402-421
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Handle: RePEc:ilr:articl:v:57:y:2004:i:3:p:402-421

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Budd, John W & Na, In-Gang, 2000. "The Union Membership Wage Premium for Employees Covered by Collective Bargaining Agreements," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 783-807, October. [Downloadable!] (restricted)
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  2. Blakemore, Arthur E & Hunt, Janet C & Kiker, B F, 1986. "Collective Bargaining and Union Membership Effects on the Wages of Male Youths," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 193-211, April. [Downloadable!] (restricted)
  3. John Forth & Neil Millward, 2000. "The Determinants of Pay Levels and fringe Benefit Privision in Britain," NIESR Discussion Papers 171, National Institute of Economic and Social Research. [Downloadable!]
  4. Booth, Alison L & Chatterji, Monojit, 1995. "Union Membership and Wage Bargaining When Membership is Not Compulsory," Economic Journal, Royal Economic Society, vol. 105(429), pages 345-60, March. [Downloadable!] (restricted)
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  5. Naylor, Robin, 1989. "Strikes, Free Riders, and Social Customs," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 771-85, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Walsh, Frank & Strobl, Eric, 2009. "Recent Trends in Trade Union Membership in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(1), pages 117–138. [Downloadable!]
  2. Stephan, Gesine & Gerlach, Knut, 2004. "Collective contracts, wages and wage dispersion in a multi-level model," IAB Discussion Paper 200406, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  3. repec:ese:iserwp: is not listed on IDEAS
  4. Alex Bryson & Lorenzo Cappellari & Claudio Lucifora, 2005. "Why so Unhappy? The Effects of Unionisation on Job Satisfaction," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Manquilef-Bächler, Alejandra A. & Arulampalam, Wiji & Smith, Jennifer C., 2009. "Differences in Decline: Quantile Regression Analysis of Union Wage Differentials in the United Kingdom, 1991-2003," IZA Discussion Papers 4138, Institute for the Study of Labor (IZA). [Downloadable!]
  6. David Blanchflower & Alex Bryson, 2004. "The Union Wage Premium in the US and the UK," CEP Discussion Papers dp0612, Centre for Economic Performance, LSE. [Downloadable!]
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