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Firm Selection and the Role of Union Heterogeneity

Author

Listed:
  • Marco de Pinto

    (Institute for Labour Law and Industrial Relations in the European Union (IAAEU))

  • Jochen Michaelis

    (University of Kassel)

Abstract

Empirical evidence suggests that high-productivity firms face stronger trade unions than low-productivity firms. Then a policy that puts all unions into a better bargaining position is no longer neutral for firm selection as in models with a uniform bargaining strength across firms. Using a Melitztype model, we show that firm selection becomes less severe. Since more low-productivity firms enter the market, the negative employment effect of unionization is mitigated. Neglecting inter-union differences in bargaining power leads to an overestimation of the negative labor market effects. However, trade liberalization increases unemployment because firms with the least powerful labor unions have to leave the market.

Suggested Citation

  • Marco de Pinto & Jochen Michaelis, 2017. "Firm Selection and the Role of Union Heterogeneity," IAAEU Discussion Papers 201710, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    • Handle: RePEc:iaa:dpaper:201710
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Unions; Bargaining Power; Firm Heterogeneity; International Trade; Unemployment;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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