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Union Wage Differentials, Product Market Influences And The Division Of Rents

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  • Stewart, Mark B.

Abstract

This paper examines the circumstances which enable trade unions to establish wage differentials. Union wage differentials are created by the capturing of rents and the paper considers the circumstances in which rents exist to be captured and when unions are able to do so. In line with theoretical predictions, differentials are found to be very different in establishments facing competitive product market conditions and in those with some degree of product market power. In the former, high union coverage of the industry and the union strength given by a pre-entry closed shop are found to be dominant requirements, with only a very small minority of establishments satisfying even these. In contrast there is found to be considerably greater scope for unions in firms with market power and neither of the above conditions are a requirement for the existence of a differential in this case. Unions are found to be unable to create differentials in establishments which operate primarily in international markets.

Suggested Citation

  • Stewart, Mark B., 1989. "Union Wage Differentials, Product Market Influences And The Division Of Rents," Economic Research Papers 268357, University of Warwick - Department of Economics.
  • Handle: RePEc:ags:uwarer:268357
    DOI: 10.22004/ag.econ.268357
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    References listed on IDEAS

    as
    1. Dewatripont, Mathias, 1987. "Entry deterrence under trade unions," European Economic Review, Elsevier, vol. 31(1-2), pages 149-156.
    2. Mark B. Stewart, 1983. "On Least Squares Estimation when the Dependent Variable is Grouped," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 737-753.
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