Unions and Income Inequality: A Heterogeneous Panel Co‐Integration and Causality Analysis

29 Pages Posted: 4 Aug 2016

See all articles by Dierk Herzer

Dierk Herzer

University of the German Federal Armed Forces - Helmut Schmidt Universität

Date Written: September 2016

Abstract

Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long‐run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel co‐integration and causality techniques, we find that (i) unions have, on average, a negative long‐run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in 40 per cent of the cases the effect is positive) and (iii) long‐run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.

Suggested Citation

Herzer, Dierk, Unions and Income Inequality: A Heterogeneous Panel Co‐Integration and Causality Analysis (September 2016). LABOUR, Vol. 30, Issue 3, pp. 318-346, 2016. Available at SSRN: https://ssrn.com/abstract=2818091 or http://dx.doi.org/10.1111/labr.12075

Dierk Herzer (Contact Author)

University of the German Federal Armed Forces - Helmut Schmidt Universität ( email )

Holstenhofweg 85
Hamburg, 22008
Germany

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