Union Wage Effect: New Evidence From Matched Employer-Employee Data
This paper estimates a union wage effect, using matched employer- employee data and estimation models that control an association between a worker's union status and an employer's characteristics. Failure to control this association may cause previous studies' estimates of the union wage effect to be biased. As long as a worker is more likely to become a union worker in a firm that offers her a higher potential for better pay, the union status is (positively) associated with employer characteristics. The empirical finding of this paper verifies this possibility. Estimates of the union wage effect are shown to be upward-biased in the estimation models without control of the employer characteristics. The estimated union wage effect of this study (in an approximate range of 0.2"3.2 percent) is less than a quarter of cross-sectional estimates, and half of individual panel estimates with unobservable person effects.
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