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HOW POWERFUL ARE TRADE UNIONS? A SKILL-BIASED TECHNOLOGICAL CHANGE APPROACH

Published online by Cambridge University Press:  09 June 2017

Antonio Neto ,
Oscar Afonso  and
Sandra T. Silva
Antonio Neto*
Affiliation:
University of Porto, Faculty of Economics, and CEF.UP
Oscar Afonso
Affiliation:
University of Porto, Faculty of Economics, and CEFAGE-UBI
Sandra T. Silva
Affiliation:
University of Porto, Faculty of Economics, and CEF.UP
*
Address correspondence to: Antonio Neto, School of Economics and Management (FEP), University of Porto, Portugal; e-mail: antoniomdneto@gmail.com.
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Abstract

This paper proposes a new theoretical framework aimed at understanding the link between technological change, skill premium, and employment. We build an endogenous growth model of directed technological change with vertical research and development (R&D) in which low-skilled workers might be organized in a trade union. This union can act as a monopoly seller of labor and decide unilaterally the low-skilled wage, or as a managerial union that bargains wage and employment with the employers' federation, i.e., firms. Our results suggest that (i) the impacts of trade unions on technological-bias and on the level of (un)employment crucially depend on their type and preferences; and (ii) trade unions can actually increase low-skilled wages and employment if they have some bargaining power and are employment-oriented. Furthermore, our framework provides some highlights to explain the relationship between wage dispersion and the deunionization process that occurred in the United Kingdom and the United States during the 1980s.

Keywords

Skill-Biased Technological ChangeBargaining StructureEmploymentEconomic Growth
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 2 , March 2019 , pp. 730 - 774
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

We particularly thank Philippe Aghion for valuable comments and suggestions. We also thank Ana Paula Ribeiro for her contributions on the labor market framework, Natércia Fortuna for her help with the econometric analysis, and Pedro Gil for his pertinent remarks regarding the general framework of the model. This research has been financed by Portuguese Public Funds through FCT (Fundação para a Ciência e a Tecnologia) in the framework of the project PEst-OE/EGE/UI4105/2014. António Neto would also like to acknowledge FCT for the financial support through the doctoral grant SFRH/BD/80734/2011. CEFAGE-UBI has financial support from FCT and FEDER/COMPETE, through grant UID/ECO/04007/2013 (POCI-01-0145-FEDER-007659).

References

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