UNION WAGE DIFFERENTIALS, PRODUCT MARKET INFLUENCES AND THE DIVISION OF RENTS
2018
Stewart, Mark B.
This paper examines the circumstances which enable trade unions to establish wage differentials. Union wage differentials are created by the capturing of rents and the paper considers the circumstances in which rents exist to be captured and when unions are able to do so. In line with theoretical predictions, differentials are found to be very different in establishments facing competitive product market conditions and in those with some degree of product market power. In the former, high union coverage of the industry and the union strength given by a pre-entry closed shop are found to be dominant requirements, with only a very small minority of establishments satisfying even these. In contrast there is found to be considerably greater scope for unions in firms with market power and neither of the above conditions are a requirement for the existence of a differential in this case. Unions are found to be unable to create differentials in establishments which operate primarily in international markets.
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