The nature of union endogeneity is examined in the light of recently proposed estimators for union wage differentials. The instrumental variable (IV) approach adopted by Duncan and Leigh is shown to yield little information on the precise nature of the endogenous process. In particular it cannot be used to sign the direction of selection into the union and nonunion sectors since by construction the IV estimates impose opposite signs on the selection terms.

The problems of estimation and interpretation of union wage differentials are examined. The properties of cross-section and longitudinal estimators are compared. Estimates are presented and those in the literature summarized. Conflicting results are obtained. Longitudinal estimators typically produce results smaller than those of OLS, while cross-section methods (instrumental variables or inverse Mills ratio) raise the estimate. The paper offers a reconciliation of these results. It supports a more optimistic conclusion than that reached in reviews by Freeman and Lewis, who argued that little has been learned from attempts to deal with the endogeneity issue. Comparisons between estimators are used to throw light on the process governing union status and to suggest interpretations of "union differentials" consistent with the current evidence.