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Unionization and unemployment rates: a re-examination of Olson's labor cartelization hypothesis

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  • William C. Gruben
  • Keith R. Phillips

Abstract

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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Suggested Citation

  • William C. Gruben & Keith R. Phillips, 1988. "Unionization and unemployment rates: a re-examination of Olson's labor cartelization hypothesis," Working Papers 8807, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:8807
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    2. Carolyn Sherwood-Call, 1990. "Assessing regional economic stability: a portfolio approach," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 17-26.

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