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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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  2. Laszlo Goerke & Markus Pannenberg, 2007. "Trade Union Membership and Works Councils in West Germany," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 14(2), pages 154 - 175.
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  6. Fitzenberger, Bernd & Kohn, Karsten & Wang, Qingwei, 2006. "The Erosion of Union Membership in Germany: Determinants, Densities, Decompositions," ZEW Discussion Papers 06-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  8. Agell, J. & Lommerud, K.E., 1990. "Union Egalitarianism As Income Insurance," Papers 1990a, Uppsala - Working Paper Series.
  9. Schnabel, Claus, 2002. "Determinants of trade union membership," Discussion Papers 15, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  10. 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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  12. Stewart, Mark B., 2005. "A comparison of semiparametric estimators for the ordered response model," Computational Statistics & Data Analysis, Elsevier, vol. 49(2), pages 555-573, April.
  13. A L Booth & M Chatterji, . "Union Membership And Wage Bargaining When Membership Is Not Compulsory," Dundee Discussion Papers in Economics 048, Economic Studies, University of Dundee.
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  15. Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Booth, Alison L, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 253-61, February.
  17. Blair, Douglas H & Crawford, David L, 1984. "Labor Union Objectives and Collective Bargaining," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 547-66, August.
  18. 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.
  19. Gabler, Siegfried & Laisney, Francois & Lechner, Michael, 1993. "Seminonparametric Estimation of Binary-Choice Models with an Application to Labor-Force Participation," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 61-80, January.
  20. Burda, Michael C, 1995. "Unions and Wage Insurance," CEPR Discussion Papers 1232, C.E.P.R. Discussion Papers.
  21. Moreton, David, 1999. "A Model of Labour Productivity and Union Density in British Private Sector Unionised Establishments," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 322-44, April.
  22. Goerke, Laszlo & Pannenberg, Markus, 2003. "Norm-Based Trade Union Membership: Evidence for Germany," IZA Discussion Papers 962, Institute for the Study of Labor (IZA).
  23. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
  24. McDonald, Ian M, 1991. "Insiders and Trade Union Wage Bargaining," The Manchester School of Economic & Social Studies, University of Manchester, vol. 59(4), pages 395-407, December.
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