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Unions and income inequality: a heterogenous cointegration and causality analysis

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Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long-run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel cointegration techniques, we find that (i) unions have, on average, a negative long-run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in about a third of cases the effect is positive), and (iii) long-run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.

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  • Herzer, Dierk, 2014. "Unions and income inequality: a heterogenous cointegration and causality analysis," Working Paper 146/2014, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2014_146
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    More about this item

    Keywords

    unions; income inequality; cross-country heterogeneity; causality; panel cointegration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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