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Longitudinal Analyses of the Effects of Trade Unions

  • Richard B. Freeman

This paper examines how measurement error biases longitudinal estimates of union effects. It develops numerical examples, statistical models, and econometric estimates which indicate that measurement error is a major problem in longitudinal data sets, so that longitudinal analyses do not provide the research panacea for determining the effects of unionism (or other economic forces) some have suggested. There are three major findings:1) The difference between the cross-section and longitudinal estimates is attributable in large part to random error in the measurement of who changes union status. Given modest errors of measurement, of the magnitudes observed,and a moderate proportion of workers changing union status, also of the magnitudes observed, measurement error biases downward estimated effects of unions by substantial amounts. 2) Longitudinal analysis of the effects of unionism on nonwage and wage outcomes tends to confirm the significant impact of unionism found in cross-section studies, with the longitudinal estimates of both nonwage and wage outcomes lover in the longitudinal analysis than in the cross-section analysis of the same data set. 3) The likely upward bias of cross-section estimates of the effect of unions and the likely downward bias of longitudinal estimates suggests that,under reasonable conditions, the two sets of estimates bound the "true" union impact posited in standard models of what unions do.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1207.

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Date of creation: Sep 1983
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Publication status: published as Journal of Labor Economics, Vol. 2, no. 1, (January 1984): pp. 1-26.
Handle: RePEc:nbr:nberwo:1207
Note: LS
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  1. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
  2. Greg J. Duncan, 1976. "Earnings Functions and Nonpecuniary Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 462-483.
  3. Duane E. Leigh, 1981. "The effect of unionism on workers' valuation of future pension benefits," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(4), pages 510-521, July.
  4. Gerald S. Goldstein & Mark V. Pauly, 1976. "Group Health Insurance as a Local Public Good," NBER Chapters, in: The Role of Health Insurance in the Health Services Sector, pages 73-114 National Bureau of Economic Research, Inc.
  5. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  6. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
  7. John M. Abowd & Henry S. Farber, 1982. "Job queues and the union status of workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(3), pages 354-367, April.
  8. Jacob Mincer, 1981. "Union Effects: Wages, Turnover, and Job Training," NBER Working Papers 0808, National Bureau of Economic Research, Inc.
  9. Richard B. Freeman, 1980. "Unionism and the dispersion of wages," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(1), pages 3-23, October.
  10. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
  11. Mellow, Wesley S, 1981. "Unionism and Wages: A Longitudinal Analysis," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 43-52, February.
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