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The Impact of Collective Bargaining: Can the New Facts Be Explained by Monopoly Unionism?

  • Richard B. Freeman
  • James L. Medoff

In this paper we focus our attention on the question of whether union/nonunion differences in nonwage outcomes can, in fact, be explained in terms of standard price-theoretic responses to real wage effects, as opposed to the real effect of unionism on economic behavior. We reach three basic conclusions. First, unions and collective bargaining have real economic effects on diverse nonwage variables which cannot be explained either in terms of price-theoretic responses to union wage effects or be attributed to the poor quality of our econometric "experiments". Second, we find that while sensitivity analyses of single-equation results and longitudinal experiments provide valuable checks on cross-sectional findings, multiple-equations approaches produced results which are too sensitive to small changes in models or samples to help resolve the questions of concern. Finally, on the basis of these findings we conclude that the search for an understanding of what unions do requires more than the standard price theoretic "monopoly" model of unionism. New (and/or old) perspectives based on institutional or industrial relations realities, contractarian or property rights theories, or other potential sources of creative views are also needed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0837.

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Date of creation: Jan 1982
Date of revision:
Publication status: Published as "The Impact of the Percentage Organized On Union and Nonunion Wages", Review of Economics and Statistics, Vol. 63, no. 4 (1981): 561-572.(With M. Kleiner) "The Impact of New Unionization on Wages and Working Conditions", JLE, Vol. 8, no. 1 (1990): S8-S25.
Handle: RePEc:nbr:nberwo:0837
Note: LS
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  1. George J. Borjas, 1979. "Job Satisfaction, Wages, and Unions," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 21-40.
  2. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
  3. Michael Podgursky, 1983. "Unions and Family Income Inequality," Journal of Human Resources, University of Wisconsin Press, vol. 18(4), pages 574-591.
  4. Duane E. Leigh, 1978. "Racial Discrimination and Labor Unions: Evidence from the NLS Sample of Middle-Aged Men," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 568-577.
  5. Greg J. Duncan, 1976. "Earnings Functions and Nonpecuniary Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 462-483.
  6. Oliver E. Williamson & Michael L. Wachter & Jeffrey E. Harris, 1975. "Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 250-278, Spring.
  7. Kochan, Thomas A & Block, Richard N, 1977. "An Interindustry Analysis of Bargaining Outcomes: Preliminary Evidence from Two-Digit Industries," The Quarterly Journal of Economics, MIT Press, vol. 91(3), pages 431-52, August.
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