Unionization and unemployment rates: a re-examination of Olson's labor cartelization hypothesis
This paper presents a test of Mancur 0lson's theory of the role that labor cartelization plays in determining interregional variations in unemployment rates. In Olson's theory, the regional degree of labor cartelization contributes to interregional variations in unemployment rates. We show that Olson's theory may be validated in the context of an empirical model that accommodates not only his theory, but also a competing hypothesis due to Freeman and Medoff, as well as business-cycle and sectoral shift related explanations of interregional variations in unemployment rates. Nevertheless, our results also offer partial substantiation of the Freeman and Medoff hypothesis. According to Freeman and Medoff, the positive relation between variation in degrees of unionization and unemployment rates among geographic regions may reflect the concentration of unions in older industrial parts of the economy.
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- Edward Montgomery, 1986. "Employment and unemployment effects of unions," Working Paper 8601, Federal Reserve Bank of Cleveland.
- Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
- William C. Gruben & Keith R. Phillips, 1986. "Understanding the Texas unemployment rate," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Nov, pages 17-30.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
- Frank Brechling, 1967. "Trends And Cycles In British Regional Unemployment," Oxford Economic Papers, Oxford University Press, vol. 19(1), pages 1-21.
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