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The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay

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Author Info
Adriana Cassoni
Steven G. Allen
Gaston J. Labadie

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Abstract

This study examines the impact of unions on wages and employment using data from Uruguay in a period where unions were banned (1973-1984), then legalized with tripartite bargaining (1984-1991) followed by industry-wide or firm-specific bargaining (1992-1997). The relationship between wages and employment shifted significantly across these periods as evidenced by - Recursive residuals show structural shifts in five of six industries with the shifts coming at the same time as the regime changes. - Wages are exogenous to employment before 1985, but not afterwards. - The wage elasticity and the employment-output elasticity fell sharply after 1984. - Unions significantly raised wages in 1985-1992, but afterwards the change in bargaining structure and increased openness led to concessions. - Starting in 1985, workers in unionized industries were less likely to be laid off than workers in nonunion industries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7501.

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Date of creation: Jan 2000
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Publication status: published as forthcoming, a conference volume by the Interamerican Development Bank,edited by Carmen Pages (title of volume unknown).
Handle: RePEc:nbr:nberwo:7501

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J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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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. Steven G Allen & Adriana Cassoni & Gastón J Labadie, 1996. "Wages and Employment After Reunionization in Uruguay," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 277-294. [Downloadable!]
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
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  4. Burgess, Simon M & Dolado, Juan J, 1989. "Intertemporal Rules with Variable Speed of Adjustment: An Application to U.K. Manufacturing Employment," Economic Journal, Royal Economic Society, vol. 99(396), pages 347-65, June. [Downloadable!] (restricted)
  5. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer. [Downloadable!] (restricted)
  6. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September. [Downloadable!] (restricted)
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  7. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September. [Downloadable!] (restricted)
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  8. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  9. Lewis, H Gregg, 1990. "Union/Nonunion Wage Gaps in the Public Sector," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S260-328, January. [Downloadable!] (restricted)
  10. Philippe Aghion & Gilles Saint-Paul, 1993. "Uncovering Some Causal Relationships between Productivity Growth and theStructure of Economic Fluctuations: A Tentative Survey," NBER Working Papers 4603, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [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. A. Cassoni & G. Fachola & G. Labadie, 2001. "The impact of unions on the economic performance of firms," Documentos de Trabajo (working papers) 1501, Department of Economics - dECON. [Downloadable!]
  2. Adriana Cassoni, 2005. "¿Cuánto empleo están generando las exoneraciones fiscales en el Uruguay?," Documentos de Trabajo (working papers) 1605, Department of Economics - dECON. [Downloadable!]
  3. Adriana Cassoni, 2000. "Trade unions in Uruguay: some historical features explaining their economic role," Documentos de Trabajo (working papers) 0400, Department of Economics - dECON. [Downloadable!]
  4. Adriana Cassoni, 2001. "Unemployment and precariousness of employment in Uruguay: who are the losers?," Documentos de Trabajo (working papers) 1601, Department of Economics - dECON. [Downloadable!]
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