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The Role of Bargaining Power: How Unions Affect Income Distribution

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  • Vincent Victor

Abstract

Neoclassical theory omits the role of bargaining power in the determination of wages. As a result, the importance of changes in the bargaining position for the development of income shares in the last decades is underestimated. This paper presents a theoretical argument why collective bargaining power is a main determinant of workers’ share of income and how its decline contributed to the severe changes in the distribution of income since the 1980s. In order to confirm this hypothesis, a panel data regression analysis is performed that suggests that unions significantly influence the distribution of income in developed countries.

Suggested Citation

  • Vincent Victor, 2019. "The Role of Bargaining Power: How Unions Affect Income Distribution," Potsdam Economic Papers 06, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    • Handle: RePEc:pot:pecpap:06
    DOI: 10.25932/publishup-42068
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    References listed on IDEAS

    as
    1. Jonas Pontusson, 2013. "Unionization, Inequality and Redistribution," British Journal of Industrial Relations, London School of Economics, vol. 51(4), pages 797-825, December.
    2. Thomas Philippon & Ariell Reshef, 2012. "Wages and Human Capital in the U.S. Finance Industry: 1909--2006," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1551-1609.
    3. Angelo Reati, 2001. "Total factor productivity - a misleading concept," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(218), pages 313-332.
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