Why Unions Survive: Understanding How Unions Overcome The Free-Rider Problem

Abstract

This paper provides evidence for why individuals join unions instead of free-riding. I model membership as legal insurance. To test the model, I use the incidence of news stories concerning allegations against teachers in the UK as a plausibly exogenous shock to demand for such insurance. I find that, for every five stories occurring in a region, teachers are 2.2 percentage points more likely to be members in the subsequent year. These effects are larger when teachers share characteristics with the news story and can explain 45 percent of the growth in teacher union membership between 1992 and 2010.