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Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models

Author

Listed:
  • Addison, John T.
  • Portugal, Pedro
  • Vilares, Hugo

Abstract

We estimate the impact of union density on wages using Portuguese matched employer-employee-contract data, extending Gelbach’s (2016) omitted variable bias decomposition procedure to obtain the contribution of worker, firm, and job-title heterogeneity to the union wage premium. The principal result is the dominance of the firm fixed effect: the allocation of workers among firms with different wage policies. For their part, the unobserved skills of union workers have only a modest impact on wages. In turn, job titles reflect the average contract in the collective agreement, while the wage cushion offers firms a margin of flexibility, partially undoing increases in the bargained wage. Finally, there is little to suggest that the union wage gap is influenced by improved match quality.

Suggested Citation

  • Addison, John T. & Portugal, Pedro & Vilares, Hugo, 2017. "Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models," GLO Discussion Paper Series 5, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:5
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    References listed on IDEAS

    as
    1. Ana Rute Cardoso & Paulo Guimarães & Pedro Portugal, 2016. "What drives the gender wage gap? A look at the role of firm and job-title heterogeneity," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 506-524.
    2. Addison, John T. & Portugal, Pedro & Vilares, Hugo, 2015. "Unions and Collective Bargaining in the Wake of the Great Recession," IZA Discussion Papers 8943, Institute for the Study of Labor (IZA).
    3. R. Alison Felix & James R. Hines, Jr., 2009. "Corporate Taxes and Union Wages in the United States," NBER Working Papers 15263, National Bureau of Economic Research, Inc.
    4. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
    5. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
    6. Anabela Carneiro & Paulo Guimarães & Pedro Portugal, 2012. "Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 133-152, April.
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    Cited by:

    1. Pedro S. Martins, 2018. "The Microeconomic Impacts of Employee Representatives: Evidence from Membership Thresholds," Working Papers 93, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

    More about this item

    Keywords

    union density; union wage gap; total compensation; bargained wages; wage cushion; wage supplements; worker/firm/job-title fixed effects; Gelbach decomposition;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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