Knowledge that Transforms

The objective of this paper is to demonstrate that the nonunion wage differential consists of two effects. The first represents the differential between the wage of a nonunion worker in a collective bargaining unit and the wage paid to a comparable worker not covered by a bargaining agreement. This effect arises from the monopoly power of organized labor. The second is the wage differential between union and nonunion workers in collective bargaining units. This latter effect is attributed to economic benefits that unionism brings to its members. Empirical evidence is presented in support of both effects.

The 1970 and 1979 Current Population Surveys are used to compute the personal distribution of income. The major innovation in this paper is that all individuals in the household are not treated identically. In particular, children receive a different proportion of income than do adults. That proportion is estimated. Its variations with respect to household characteristics are discussed, and a final distribution of personal income is computed. That distribution has considerably fatter tails than does the one normally used.

This paper examines the provision of industrial safety in a competitive labor market under the assumption that it takes time for workers to learn about changes in safety levels at a firm. It is shown that safety will in general be underprovided and that in some cases government-enforced workmen's compensation can bring improvements. The results hold even though in equilibrium all workers are perfectly informed about the level of safety prevailing at each firm and each is free to move to any firm he likes.

Previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context. Using a sample of continuous longitudinal labor market histories, estimates are derived for welfare-nonwelfare differences in labor market flows among the states of employment, unemployment, and nonparticipation. The estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients. The findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment.

This paper uses industry price-cost margin data to estimate the extent to which unions reduce profits. Estimates allowing for the endogeneity of union status are contrasted with estimates that assume union status is exogenous and not determined in part by either profitability or industry structure. Endogeneity is found to be an important consideration in estimating the union impact on profits: two-stage estimates are considerably larger than OLS estimates. The final section explores the total estimated redistribution from capital to labor in the manufacturing sector. An important conclusion is that unions raise prices less than was previously believed.

Decentralized wage setting in search equilibrium models is inefficient because the meeting firm and worker ignore the dependence of job-matching probabilities on the number of firms and workers engaged in search. This paper investigates whether risk-neutral monopolistic unions will have an incentive to internalize this externality. I find that the externality will be internalized only if the union's policy is chosen by unemployed persons. If employed persons influence union policy, both the union wage and unemployment will be too high. A tax on the union wage combined with an employment subsidy to firms can correct this inefficiency.

This paper analyzes a model that highlights imperfect monitoring and the threat of dismissal as microeconomic underpinnings for the efficiency-wage hypothesis. My major innovation is to allow the rules for dismissal as well as the wage to be determined endogenously as the equilibrium of a Stackelberg game played between firms and workers. The key results are as follows. A nontrivial equilibrium (where positive output is produced) must involve involuntary unemployment in that employed workers are strictly better off than are the unemployed. In addition, the equilibrium wage is rigid with respect to exogenous shifts in productivity.

Logit estimates of strike incidence are made based on a unique and comprehensive data set of 2,437 collective agreements-the appropriate level of aggregation since that is where bargaining occurs. The results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes. Such functions of strikes are to generate information, elicit truth telling, establish reputations, provide catharsis, and solve intraorganizational conflict.