Citation

Discussion Paper Details

Please find the details for DP1232 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Unions and Wage Insurance

Author(s): Michael C Burda

Publication Date: August 1995

Keyword(s): Implicit Contracts, Insurance, Labour Unions and Wage Differentials

Programme Area(s): Human Resources

Abstract: Existing theories of unions emphasize their impact on wage levels relative to the opportunity cost of leisure. This paper explores the possibility that monopoly unions provide income insurance against idiosyncratic wage variability. An optimal union contract is characterized by real wage and other types of flexibility only in response to systematic changes in underlying uncertainty. Under such conditions, there is no presumption that the `union wage premium' relative to the free market wage is positive. The model shows the effect of unemployment benefits, average productivity, and risk on the desirability of union membership, and offers an economic interpretation of equity and solidarity in union policy. It can also explain the negative correlation between inequality and unionism in developed countries.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1232

Bibliographic Reference

Burda, M. 1995. 'Unions and Wage Insurance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1232