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

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  • Adriana Cassoni
  • Steven G. Allen
  • Gaston J. Labadie

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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Bibliographic Info

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 Job Creation in Latin America and the Caribbean: Recent Trends and the Policy Challenges. Carmen Pages, Gaelle Pierre, Stefano Scarpetta (eds) 2009
Handle: RePEc:nbr:nberwo:7501

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  1. 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.
  2. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Adriana Cassoni & Zuleika Ferré, 1997. "Costos no salariales en el mercado de trabajo del Uruguay," Documentos de Trabajo (working papers) 0897, Department of Economics - dECON.
  5. Rama, Martin, 1994. "Bargaining structure and economic performance in the open economy," European Economic Review, Elsevier, vol. 38(2), pages 403-415, February.
  6. Rama, Martin, 1997. "Organized Labor and the Political Economy of Product Market Distortions," World Bank Economic Review, World Bank Group, vol. 11(2), pages 327-55, May.
  7. Steven G. Allen, 1988. "Unions and Job Security in the Public Sector," NBER Chapters, in: When Public Sector Workers Unionize, pages 271-304 National Bureau of Economic Research, Inc.
  8. Lockwood, Ben & Manning, Alan, 1989. "Dynamic Wage-Employment Bargaining with Employment Adjustment Costs," Economic Journal, Royal Economic Society, vol. 99(398), pages 1143-58, December.
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  10. Steven G Allen & Adriana Cassoni & Gastón J Labadie, 1996. "Wages and Employment After Reunionization in Uruguay," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 277-294.
  11. Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
  12. Steven Allen & Adriana Cassoni & Gastón J. Labadie, 1994. "Labor market flexibility and unemployment in Chile and Uruguay," Estudios de Economia, University of Chile, Department of Economics, vol. 21(esp Year ), pages 127-146, November.
  13. 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.
  14. Carruth, Alan A & Oswald, Andrew J, 1987. "On Union Preferences and Labour Market Models: Insiders and Outsi ders," Economic Journal, Royal Economic Society, vol. 97(386), pages 431-45, June.
  15. Machin, Stephen J & Wadhwani, Sushil, 1991. "The Effects of Unions on Organisational Change and Employment," Economic Journal, Royal Economic Society, vol. 101(407), pages 835-54, July.
  16. Philippe Aghion & Gilles Saint-Paul, 1998. "Uncovering Some Causal Relationships Between Productivity Growth and the Structure of Economic Fluctuations: A Tentative Survey," LABOUR, CEIS, vol. 12(2), pages 279-303, 07.
  17. 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.
  18. Steven G. Allen, 1985. "Union Work Rules and Efficiency in the Building Trades," NBER Working Papers 1733, National Bureau of Economic Research, Inc.
  19. 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.
  20. 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.
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Cited by:
  1. Adriana Cassoni, 2005. "¿Cuánto empleo están generando las exoneraciones fiscales en el Uruguay?," Documentos de Trabajo (working papers) 1605, Department of Economics - dECON.
  2. 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.
  3. World Bank, 2001. "Household Risk, Self-Insurance and Coping Strategies in Urban Argentina," World Bank Other Operational Studies 15467, The World Bank.
  4. World Bank, 2001. "Uruguay : Maintaining Social Equity in a Changing Economy," World Bank Other Operational Studies 15486, The World Bank.
  5. Adriana Cassoni, 2000. "Trade unions in Uruguay: some historical features explaining their economic role," Documentos de Trabajo (working papers) 0400, Department of Economics - dECON.
  6. Adriana Cassoni, 2001. "Unemployment and precariousness of employment in Uruguay: who are the losers?," Documentos de Trabajo (working papers) 1601, Department of Economics - dECON.
  7. repec:idb:brikps:21778 is not listed on IDEAS

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