Unions: Rent Creators or Extractors?

19 Pages Posted: 14 Apr 2005

See all articles by Toke Skovsgaard Aidt

Toke Skovsgaard Aidt

University of Cambridge - Faculty of Economics and Politics

Vania Sena

Independent

Abstract

This paper proposes a model of workplace-specific unions that integrates two views of what unions do. One view holds that unions mainly engage in rent extraction. Another view holds that unions mainly engage in rent creation by providing agency services that increase workplace productivity. We demonstrate that the choice between the two activities is systematically related to the economic and regulatory environment in which the union operates. Product market competition encourages rent creation, while labor market deregulation encourages rent extraction. Moreover, we provide a rationale for why firms may want to subsidize unions.

Suggested Citation

Aidt, Toke Skovsgaard and Sena, Vania, Unions: Rent Creators or Extractors?. Available at SSRN: https://ssrn.com/abstract=703314

Toke Skovsgaard Aidt (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

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Vania Sena

Independent

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