UNION WAGE COMPRESSION AND SKILL ACQUISITION

ABSTRACT In this paper, I examine the relationship between unionisation and total output in an economy with a dual labour market, heterogeneous agents, and human capital investment. My primary focus is the skill acquisition channel, through which unionization affects total output. I theoretically de...

Full description

Saved in:
Bibliographic Details
Published inBulletin of economic research Vol. 71; no. 3; pp. 313 - 341
Main Author Aksoy, Tolga
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.07.2019
Subjects
Capital investments
dual labour market
E24
Economic models
Human capital
J24
J31
J51
Labor market
occupational choice
Power
Productivity
Unionization
unions
Online AccessGet full text

Cover

More Information
Summary:ABSTRACT In this paper, I examine the relationship between unionisation and total output in an economy with a dual labour market, heterogeneous agents, and human capital investment. My primary focus is the skill acquisition channel, through which unionization affects total output. I theoretically demonstrate that the skill premium, and thus human capital investment, is determined by the prevalence of unions in high‐ or low‐skill‐intensive sectors. In particular, if a low (high)‐skill sector is unionised, then the skill premium is higher (lower), ensuring a larger (smaller) high‐skill sector, irrespective of the unions bargaining power. To test this hypothesis, I also empirically investigate the effects of unionisation on total productivity. The results indicate that through the reallocation of labour, unionisation induces an expansion of high‐skill‐intensive sectors, while low‐skill‐intensive sectors contract.
Bibliography:I am indebted to the editor, two anonymous referees, Tito Boeri, Laura Bottazzi, Gino Gancia, Paolo Manasse, Annaig Morin, Gianmarco Ottaviano, Giovanni Pica, Aldo Rustichini, Seckin Sunal, Davide Suverato, Burak ŁUnveren, and Morteza Zamanian and to seminar participants at the Bocconi University and Yildiz Technical University for their insightful comments and suggestions. The usual disclaimers apply.
ISSN:0307-3378
1467-8586
DOI:10.1111/boer.12176