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Why Unions Reduce Wage Inequality, II: The Relation between Solidarity and Unity

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  • Stennek, Johan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

This paper demonstrates that the decisions by workers of different skills to unite to form industry unions is closely linked to the egalitarian wage policies that such unions pursue. These results help interpret the stylized facts about unions: that they not only increase wages but also reduce wage inequality. I also demonstrate that political caps on collectively negotiated minimum wages may reduce the wages of all blue-collar workers (cf. “internal devaluation”), but that they may also cause unions to disintegrate in the long run.

Suggested Citation

  • Stennek, Johan, 2015. "Why Unions Reduce Wage Inequality, II: The Relation between Solidarity and Unity," Working Papers in Economics 625, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0625
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    File URL: http://hdl.handle.net/2077/40533
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    References listed on IDEAS

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    Cited by:

    1. Michael Ollinger & Friedrich L. Sell, 2017. "What Determines Union Density? A Political Economy Model of the Labor Market with Empirical Evidence in the Context of European Countries," Review of Economics & Finance, Better Advances Press, Canada, vol. 10, pages 18-32, November.
    2. Johan Stennek, 2020. "Why Unions Reduce Wage Inequality: A Theory of Domino Effects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1045-1072, July.
    3. Sell, Friedrich L. & Öllinger, Michael, 2017. "Reward effects and incentive effects on the labor market: Empirical evidence for European countries," Working Papers in Economics 2017,2, Bundeswehr University Munich, Economic Research Group.

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    More about this item

    Keywords

    inequality; wage differences; minimum wages; trade unions; collective negotiations; strategic commitment;
    All these keywords.

    JEL classification:

    • 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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