The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay

46 Pages Posted: 8 May 2000 Last revised: 1 Jan 2023

See all articles by Adriana Cassoni

Adriana Cassoni

Universidad de la Republica

Steven G. Allen

North Carolina State University - Poole College of Management

Gaston J. Labadie

Universidad ORT at Uruguay

Date Written: January 2000

Abstract

This study examines the impact of unions on wages and employment using data from Uruguay in a period where unions were banned (1973-1984), then legalized with tripartite bargaining (1984-1991) followed by industry-wide or firm-specific bargaining (1992-1997). The relationship between wages and employment shifted significantly across these periods as evidenced by - Recursive residuals show structural shifts in five of six industries with the shifts coming at the same time as the regime changes. - Wages are exogenous to employment before 1985, but not afterwards. - The wage elasticity and the employment-output elasticity fell sharply after 1984. - Unions significantly raised wages in 1985-1992, but afterwards the change in bargaining structure and increased openness led to concessions. - Starting in 1985, workers in unionized industries were less likely to be laid off than workers in nonunion industries.

Suggested Citation

Cassoni, Adriana and Allen, Steven G. and Labadie, Gaston J., The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay (January 2000). NBER Working Paper No. w7501, Available at SSRN: https://ssrn.com/abstract=213408

Adriana Cassoni (Contact Author)

Universidad de la Republica ( email )

Gonzalo Ramirez 1926
Montevideo, 11200
Uruguay

Steven G. Allen

North Carolina State University - Poole College of Management ( email )

Hillsborough Street
Raleigh, NC 27695-8614
United States
919-515-6941 (Phone)
919-515-5073 (Fax)

Gaston J. Labadie

Universidad ORT at Uruguay ( email )

Bvar. Espana 2633
Montevideo
Uruguay, 11300