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Estimating Union Wage Effects in Great Britain During 1991-2003

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  • Georgios Marios Chrysanthou

Abstract

Using a dynamic model of unionism and wage determination we find that the unobserved factors that influence union membership also affect wages. The estimates suggest that UK trade unions still play a non-negligible, albeit diminishing, role in wage formation. It appears that the greater impact of unobservables in determining individual union propensity concerning the second period under analysis, versus past unionisation experience, implies that those remaining in unions during (1997-2002) gain most from their sorting decision. The significant contribution of unobserved heterogeneity renders the total union wage differential highly variable across individuals. The endogeneity correction procedure employed yields a discernible pattern of the estimated union wage effect relative to OLS and Fixed effects. This is in line with Robinson (1989a) and Vella and Verbeek (1998) and refutes the pessimistic conclusions reached by Freeman and Medoff (1982) and Lewis (1986) that endogeneity correction methodologies do not contribute to our understanding of the union wage effect puzzle.

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  • Georgios Marios Chrysanthou, 2008. "Estimating Union Wage Effects in Great Britain During 1991-2003," Discussion Papers 08/12, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:08/12
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    1. Oscar Landerretche & Nicolás Lillo & Esteban Puentes, 2013. "The Union Effect on Wages in Chile: A Two-Stage Approach Using Panel Data," LABOUR, CEIS, vol. 27(2), pages 164-191, June.

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    More about this item

    Keywords

    union status; union wage effects; unobserved heterogeneity; dynamic model of unionism and wage determination;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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