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Deunionization, Technical Change and Inequality

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  • Acemoglu, Daron
  • Aghion, Philippe
  • Violante, Giovanni L

Abstract

We argue that inequality and rapid deunionization are related, and that skill-biased technical change has been an important factor in deunionization as well as in the rise in inequality. Skill-biased technical change causes deunionization because it increases the outside option of skilled workers, undermining the coalition among skilled and unskilled worker in support of unions. Our approach implies that although deunionization is not the underlying cause of the increase in inequality, it amplifies the direct effect of skill-biased technical change by removing the wage compression imposed by unions. We also show that deunionization may happen inefficiently.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2764.

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Date of creation: Apr 2001
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Handle: RePEc:cpr:ceprdp:2764

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Keywords: Deunionization; Efficiency-Enhancing Unions; Rent-Seeking Unions; Skill-Biased Technical Change; Wage Inequality;

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  1. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
  2. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
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  7. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
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