The seminar will be held in the Visitor Centre at 3 pm.
Abstract
The unionization rate in the US varies widely both across sectors and states as well as over time. This paper shows that the interaction of firm turnover on the one hand and costly union organizing on the other might play an important role for unionization outcomes in the US. I develop a model that combines an entry-exit framework of monopolistically competing firms with costly union organizing. A novel feature of the model is that the union both decides about wages and organizing, and moreover, organizing is motivated by the fact that a higher union share allows for higher wages by decreasing product market competition by non-union firms. Firm turnover is a crucial determinant of the unionization rate in the US because entering firms are typically born as non-union and have to first be organized by unions. Moreover, the union's firm share usually diminishes only through exit of unionized firms. Thus, higher firm turnover requires more union organizing to sustain a given level of unionization. In the model, the unionization rate and the union wage are shaped not only by the flow mechanics of union organizing and firm turnover, but also by the equilibrium interaction of endogenous firm entry with the union's organizing decision: Higher union organizing deters firm entry, and conversely higher entry lowers the incentives for organizing. Numerical results show that the steady state unionization rate is higher if 1. firm entry costs are higher, 2. exit rates are lower, and 3. organizing costs are lower. Further, the transition dynamics of the model support two explanations of the long-term union decline in the US: First, an increase in the cost of organizing, and secondly, deregulation understood here as a decrease in the cost of firm entry.