Union Membership and Employment Dynamics: A Note
We analyze union behavior in a model with membership dynamics and compare the labor market outcomes to static union models. Based on empirical findings we modify standard models and show that the well-known result that static models overstate distortions caused by unions only holds in the special case of firm-level wage setting. If, however, the union is big enough to determine employment for the whole sector, it rather depends on both the elasticity of labor demand and unionâ€™s time preference whether static frameworks overrate or even underrate unionsâ€™ distortions.
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