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Wage Dispersion in a Partially Unionized Labor Force

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  • John T. Addison
  • Ralph W. Bailey
  • W. Stanley Siebert

Abstract

Taking as our point of departure a model proposed by David Card (2001), we suggest new methods for analyzing wage dispersion in a partially unionized labor market. Card's method disaggregates the la- bor population into skill categories, which procedure entails some loss of information. Accordingly, we develop a model in which each worker individually is assigned a union-membership probability and predicted union and nonunion wages. The model yields a natural three-way de- composition of variance. The decomposition permits counterfactual analysis, using concepts and techniques from the theory of factorial experimental design. We examine causes of the increase in U.K. wage dispersion between 1983 and 1995. Of the factors initially considered, the most influential was a change in the structure of remuneration inside both the union and nonunion sectors. Next in importance was the decrease in union membership. Finally, exogenous changes in la- bor force characteristics had, for most groups considered, only a small negative effect. We supplement this preliminary three-factorial analy- sis with a ?ve-factorial analysis that allows us to examine effects from the wage-equation parameters in greater detail.

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Bibliographic Info

Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 09-04.

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Length: 37 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:bir:birmec:09-04

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Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk
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Related research

Keywords: wage dispersion; three-way variance decomposition; bivariate kernal density smoothing; union membership; deunionization; factorial experimental design;

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  1. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  3. Checchi, Daniele & Visser, Jelle & van de Werfhorst, Herman G., 2007. "Inequality and Union Membership: The Impact of Relative Earnings Position and Inequality Attitudes," IZA Discussion Papers 2691, Institute for the Study of Labor (IZA).
  4. Amanda Gosling & Thomas Lemieux, 2004. "Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 275-312 National Bureau of Economic Research, Inc.
  5. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  6. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  7. Richard B. Freeman, 2005. "What Do Unions Do?-- The 2004 M-Brane Stringtwister Edition," Journal of Labor Research, Transaction Publishers, vol. 26(4), pages 641-668, November.
  8. Bell, B. & Pitt, M.K., 1995. "Trade Union Decline and the Distribution of Wages in the UK: Evidence from Kernel Density Estimation," Economics Papers 107, Economics Group, Nuffield College, University of Oxford.
  9. Juan Francisco Canal Domínguez & César Rodríguez Gutiérrez, 2004. "Collective Bargaining and Within-firm Wage Dispersion in Spain," British Journal of Industrial Relations, London School of Economics, vol. 42(3), pages 481-506, 09.
  10. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April.
  11. Addison, John T. & Bailey, Ralph & Siebert, W. Stanley, 2003. "The Impact of Deunionisation on Earnings Dispersion Revisited," IZA Discussion Papers 724, Institute for the Study of Labor (IZA).
  12. David Card & Thomas Lemieux & W. Craig Riddell, 2004. "Unions and Wage Inequality," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 519-562, October.
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