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Risk Aversion and Trade Union Membership

  • Goerke, Laszlo


    (IAAEU, University of Trier)

  • Pannenberg, Markus


    (Bielefeld University of Applied Sciences)

In an open-shop model of trade union membership with heterogeneity in risk attitudes, a worker's relative risk aversion can affect the decision to join a trade union. Furthermore, a shift in risk attitudes can alter collective bargaining outcomes. Using German panel data (GSOEP) and three novel direct measures of individual risk aversion, we find evidence of a significantly positive relationship between risk aversion and the likelihood of union membership. Additionally, we observe a negative correlation between bargained wages in aggregate and average risk preferences of union members. Our results suggest that an overall increase in risk aversion contributes to wage moderation and promotes employment.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3351.

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Length: 26 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3351
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  1. Laszlo Goerke & Markus Pannenberg, 2004. "Norm-Based Trade Union Membership: Evidence for Germany," German Economic Review, Verein für Socialpolitik, vol. 5(4), pages 481-504, November.
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  7. Fitzenberger, Bernd & Kohn, Karsten & Wang, Qingwei, 2006. "The Erosion of Union Membership in Germany: Determinants, Densities, Decompositions," IZA Discussion Papers 2193, Institute for the Study of Labor (IZA).
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  18. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
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  20. Schnabel, Claus & Wagner, Joachim, 2003. "Trade Union Membership in Eastern and Western Germany: Convergence or Divergence?," IZA Discussion Papers 707, Institute for the Study of Labor (IZA).
  21. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
  22. Schnabel, Claus, 2002. "Determinants of trade union membership," Discussion Papers 15, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  23. Alison L. Booth, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 253-261.
  24. Douglas H. Blair & David L. Crawford, 1984. "Labor Union Objectives and Collective Bargaining," The Quarterly Journal of Economics, Oxford University Press, vol. 99(3), pages 547-566.
  25. Burda,M.C., 1995. "Unions and Wage Insurance," Papers 596, Stockholm - International Economic Studies.
  26. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, 08.
  27. Sampson, Anthony A, 1983. "Employment Policy in a Model with a Rational Trade Union," Economic Journal, Royal Economic Society, vol. 93(37), pages 297-311, June.
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