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Union and nonunion wages at the firm level: A combined institutional and econometric analysis

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Abstract

This paper presents an analysis of union-nonunion wage differences at the intrafirm level. At this level of analysis, modeling of the union effect can be informed by a historical overview of the organizational context of unionization, which is not as feasible at other levels of analysis. The findings suggest that a simultaneous equation (2-stage) model, in which union status is treated as an endogenous variable, is not appropriate in this case. Moreover, OLS estimations of the union effect on wages from a one-stage model in which union status is exogenous is found to be efficient and unbiased. The study suggests that combining institutional details of the organizational context with econometric analysis facilitates a better understanding of not only the magnitude of wage differences but also of how the differences may be interpreted in the context of industrial relations.

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The author wishes to thank Phil Beaumont, Robert Davies, Harry Katz, Tom Kochan and Mark Thompson for helpful comments on an earlier version of this manuscript.

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Verma, A. Union and nonunion wages at the firm level: A combined institutional and econometric analysis. Journal of Labor Research 8, 67–83 (1987). https://doi.org/10.1007/BF02685145

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