Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200679 
Year of Publication: 
2018
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 23-2018
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
Empirical evidence suggests that the bargaining power of trade unions differs across firms and sectors. Standard models of unionization ignore this pattern by assuming a uniform bargaining strength. In this paper, we incorporate union heterogeneity into a Melitz (2003) type model. Union bargaining power is assumed to be firm-specific and varies with firm productivity. This framework allows us to re-analyze the labor market effects of (i) a symmetric increase in the bargaining power of all unions and (ii) trade liberalization. We show that union heterogeneity unambiguously reduces the negative employment effects of stronger unions. Firm-specific bargaining power creates a link between unionization and the entry and exit of firms, implying a reduction of the unions' expected bargaining power. Moreover, union heterogeneity constitutes an (un)employment effect of trade liberalization. If unions are most powerful in the high-productivity (low-productivity) firms, trade liberalization will increase (decrease) unemployment.
Subjects: 
Trade Unions
Bargaining Power
Firm Heterogeneity
International Trade
Unemployment
JEL: 
F1
F16
J5
Document Type: 
Working Paper

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