The Analysis of Union Behavior

Working Paper: NBER ID: w1502

Authors: Henry S. Farber

Abstract: There is now a substantial body of economic research that models the behavior of labor unions as maximization of a well defined objective function. This paper presents both a selective critical survey of this literature and a preliminary consideration of some important problems that have not been addressed in the literature to date. Particular emphasis is on work that is operational in the sense that it has an empirical component or is amenable to empirical implementation. Topics surveyed include 1) the general economic modus operandi of labor unions in the U.S. economy; 2) the structure of bargaining and the efficiency of labor contracts; 3) the bargaining process as it relates to the identification of union objectives; and 4) empirical studies of union objectives. While much is learned from the existing literature, it is argued that amore general political/ economic model of union behavior is needed. This model would derive the objective function of the union in a consistent fashion from the preferences of the workers and union leaders through a well defined political process. Three important issues that are central to the development of such a model are addressed: 1) The determination of the size of the union and the rules used for the allocation of scarce union jobs;. 2) the aggregation of preferences when workers are heterogeneous; and 3) the union leadership asan entity capable of pursuing its own goals.

Keywords: labor unions; wages; employment; collective bargaining; union objectives

JEL Codes: J51; J53

Causal Claims

Cause	Effect
union objectives (J51)	economic constraints (D10)
union size (J51)	bargaining power (C79)
rules for job allocation (C78)	bargaining power (C79)
bargaining power (C79)	wage outcomes (J31)
bargaining power (C79)	employment outcomes (J68)
union behavior (J51)	wage and employment outcomes (J31)