The Dynamics of Power in Labor Markets: Monopolistic Unions Versus Monopsonistic Employers

How Do Firms Respond to Unions?

“…We believe a core explanation for this differential effect relates to labor and product market concentration differences across sectors. Specifically, Dodini et al (2022) find that individuals are more willing to unionize in markets where labor demand is more concentrated due to a higher potential return to unionization.…”

Organized Labor, Labor Market Imperfections, and Employer Wage Premia

“…1 Yet, in analyzing reduced-form effects of industrial relations on wages these contributions consider only endpoints rather than the parameters we consider that permit direct measurement of how much wages deviate from the marginal revenue product of labor. What is more, evidence resting on quasi-experiments tends to look at specific instances rather than broad-based populations of employers and workers that we are able to consider, though the recent papers by Farber, Herbst, Kuziemko, and Naidu (2021) and Dodini, Salvanes, and Wille ´n (2022) form notable exceptions. For these reasons, we see our contribution as complementary to this quasi-experimental evidence, although, admittedly, we cannot rest identification on that kind of exogenous variation in industrial relations.…”

How Do Firms Respond to Unions?

“…First, there is a large and growing literature that causally identifies the effect of unions on individual workers through quasi-experimental research designs, using a range of approaches that include regression discontinuity designs and propensity score matching techniques. While many of these studies have focused exclusively on wage and inequality effects (e.g., DiNardo and Lee (2004); Lee and Mas (2012); Frandsen (2021); Sojourner et al (2015); Card and De La Rica (2006); Bryson (2002); Fortin et al (2022); Barth et al (2020); Farber et al (2021); Dodini et al (2022)), a more recent set of papers have begun exploring other career effects of unionization as well (e.g., Finnigan and Hale (2018); Frandsen and Webb (forthcoming); Hagedorn et al (2016); Park et al (2019); Dodini et al (2023b)). On average, these papers find union wage premiums in the range of 0.1-0.4 log points and that workers benefit from unions not only in terms of compensation but also in terms of the quality of the work environment, improved job security, and enhanced advancement opportunities.…”