Wage Dispersion in a Partially Unionized Labor Force

38 Pages Posted: 14 Jun 2009

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Ralph W. Bailey

University of Birmingham - Department of Economics

Stanley Siebert

Business School, University of Birmingham; IZA Institute of Labor Economics; Institute of Economic Affairs (IEA)

Abstract

Taking as our point of departure a model proposed by David Card (2001), we suggest new methods for analyzing wage dispersion in a partially unionized labor market. Card's method disaggregates the labor population into skill categories, which procedure entails some loss of information. Accordingly, we develop a model in which each worker individually is assigned a union-membership probability and predicted union and nonunion wages. The model yields a natural three-way decomposition of variance. The decomposition permits counterfactual analysis, using concepts and techniques from the theory of factorial experimental design. We examine causes of the increase in U.K. wage dispersion between 1983 and 1995. Of the factors initially considered, the most influential was a change in the structure of remuneration inside both the union and nonunion sectors. Next in importance was the decrease in union membership. Finally, exogenous changes in labor force characteristics had, for most groups considered, only a small negative effect. We supplement this preliminary three-factorial analysis with a five-factorial analysis that allows us to examine effects from the wage-equation parameters in greater detail.

Keywords: wage dispersion, three-way variance decomposition, bivariate kernel density smoothing, union membership, deunionization, factorial experimental design

JEL Classification: D3, J31, J51

Suggested Citation

Addison, John T. and Bailey, Ralph W. and Siebert, Stanley, Wage Dispersion in a Partially Unionized Labor Force. IZA Discussion Paper No. 4202. Available at SSRN: https://ssrn.com/abstract=1419345

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
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HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ralph W. Bailey

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Stanley Siebert

Business School, University of Birmingham ( email )

Edgbaston
Birmingham, B15 2TT
United Kingdom
(44) 1214146698 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street, Westminster
London, SW1P 3LB
United Kingdom

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