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The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay

Author

Listed:
  • Adriana Cassoni
  • Steven G. Allen
  • Gaston J. Labadie

Abstract

This study examines the impact of unions on wages and employment using data from Uruguay in a period where unions were banned (1973-1984), then legalized with tripartite bargaining (1984-1991) followed by industry-wide or firm-specific bargaining (1992-1997). The relationship between wages and employment shifted significantly across these periods as evidenced by - Recursive residuals show structural shifts in five of six industries with the shifts coming at the same time as the regime changes. - Wages are exogenous to employment before 1985, but not afterwards. - The wage elasticity and the employment-output elasticity fell sharply after 1984. - Unions significantly raised wages in 1985-1992, but afterwards the change in bargaining structure and increased openness led to concessions. - Starting in 1985, workers in unionized industries were less likely to be laid off than workers in nonunion industries.

Suggested Citation

  • Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay," NBER Working Papers 7501, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7501
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Steven G. Allen, 1988. "Unions and Job Security in the Public Sector," NBER Chapters,in: When Public Sector Workers Unionize, pages 271-304 National Bureau of Economic Research, Inc.
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    5. Adriana Cassoni & Zuleika Ferré, 1997. "Costos no salariales en el mercado de trabajo del Uruguay," Documentos de Trabajo (working papers) 0897, Department of Economics - dECON.
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    14. Lewis, H Gregg, 1990. "Union/Nonunion Wage Gaps in the Public Sector," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 260-328, January.
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    17. Lockwood, Ben & Manning, Alan, 1989. "Dynamic Wage-Employment Bargaining with Employment Adjustment Costs," Economic Journal, Royal Economic Society, vol. 99(398), pages 1143-1158, December.
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    Cited by:

    1. A. Cassoni & G. Fachola & G. Labadie, 2001. "The impact of unions on the economic performance of firms," Documentos de Trabajo (working papers) 1501, Department of Economics - dECON.
    2. Adriana Cassoni, 2005. "¿Cuánto empleo están generando las exoneraciones fiscales en el Uruguay?," Documentos de Trabajo (working papers) 1605, Department of Economics - dECON.
    3. Adriana Cassoni, 2000. "Trade unions in Uruguay: some historical features explaining their economic role," Documentos de Trabajo (working papers) 0400, Department of Economics - dECON.
    4. World Bank, 2001. "Household Risk, Self-Insurance and Coping Strategies in Urban Argentina," World Bank Other Operational Studies 15467, The World Bank.
    5. Adriana Cassoni, 2001. "Unemployment and precariousness of employment in Uruguay: who are the losers?," Documentos de Trabajo (working papers) 1601, Department of Economics - dECON.
    6. World Bank, 2001. "Uruguay : Maintaining Social Equity in a Changing Economy," World Bank Other Operational Studies 15486, The World Bank.

    More about this item

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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