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How Powerful Are Trade Unions? A Skill-Biased Technological Change Approach

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  • Neto, Antonio
  • Afonso, Oscar
  • Silva, Sandra T.
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.

Suggested Citation

  • Neto, Antonio & Afonso, Oscar & Silva, Sandra T., 2019. "How Powerful Are Trade Unions? A Skill-Biased Technological Change Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 730-774, March.
    • Handle: RePEc:cup:macdyn:v:23:y:2019:i:02:p:730-774_00
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    Citations

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    Cited by:

    1. Neto, António & Furukawa, Yuichi & Ribeiro, Ana Paula, 2017. "Can Trade Unions Increase Social Welfare? An R&D Model with Cash-in-Advance Constraints," MPRA Paper 77312, University Library of Munich, Germany.
    2. Oscar Afonso & Rosa Forte, 2023. "How powerful are fiscal and monetary policies in a directed technical change model with humans and robots?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3008-3032, July.
    3. Afonso, Oscar & Pinho, Mafalda, 2022. "How to reverse a negative asymmetric labor productivity shock in the European Union? A directed technical change analysis with fiscal and monetary policies," Mathematical Social Sciences, Elsevier, vol. 116(C), pages 47-67.
    4. Oscar Afonso, 2023. "Losers and losses of COVID-19: a directed technical change analysis with fiscal and monetary policies," Economic Change and Restructuring, Springer, vol. 56(3), pages 1777-1821, June.
    5. Žilvinas Martinaitis & Aleksandr Christenko & Jonas AntanaviÄ ius, 2021. "Upskilling, Deskilling or Polarisation? Evidence on Change in Skills in Europe," Work, Employment & Society, British Sociological Association, vol. 35(3), pages 451-469, June.
    6. Óscar Afonso & Tiago Neves Sequeira & Marcelo Santos & Pedro Cunha Neves, 2023. "Global Firms, (de)unionization and Wage Inequality," Open Economies Review, Springer, vol. 34(5), pages 979-1013, November.

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