Freeman RB, Medoff JL. The Impact of Collective Bargaining: Illusion or Reality?. NBER Working Paper #0735 (August 1981).


This paper reviews a significant body of evidence regarding the impact of trade unionism on economic performance and seeks to evaluate antithetical views regarding whether estimated differences between union and nonunion workers and firms represent: illusions created by poor experiments, real effects explicable solely in price-theoretic terms, or real effects which reflect the non wage-related dimensions of trade unions. The review yields conclusions on both the substantive questions at hand and the methodologies which have been used to address their validity. With respect to the illusion/reality debate, the preponderance of extant evidence indicates that union effects on a wide variety of economic variables estimated with cross-sectional data are real. Moreover, since the effects of unions on nonwage outcomes generally come from models which hold fixed the level of wages and variables affected by wages, the evidence supports the view that unions do much more than simply raise wages.

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