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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.

Suggested Citation

  • Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay," NBER Working Papers 7501, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7501
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    Cited by:

    1. Casacuberta, Carlos & Gandelman, Néstor, 2023. "Wage councils, product markups and wage markdowns: Evidence from Uruguay," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    2. World Bank, 2001. "Household Risk, Self-Insurance and Coping Strategies in Urban Argentina," World Bank Publications - Reports 15467, The World Bank Group.
    3. Adriana Cassoni, 2001. "Unemployment and precariousness of employment in Uruguay: who are the losers?," Documentos de Trabajo (working papers) 1601, Department of Economics - dECON.
    4. 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.
    5. Adriana Cassoni, 2005. "¿Cuánto empleo están generando las exoneraciones fiscales en el Uruguay?," Documentos de Trabajo (working papers) 1605, Department of Economics - dECON.
    6. Adriana Cassoni, 2000. "Trade unions in Uruguay: some historical features explaining their economic role," Documentos de Trabajo (working papers) 0400, Department of Economics - dECON.
    7. World Bank, 2001. "Uruguay : Maintaining Social Equity in a Changing Economy," World Bank Publications - Reports 15486, The World Bank Group.

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    JEL classification:

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

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