Deunionization and job polarization – a macroeconomic model analysis for a small open economy |
| |
Authors: | Thomas von Brasch Marit Linnea Gjelsvik |
| |
Institution: | 1. Statistics Norway: Research Department, Unit for Macroeconomics, Oslo, Norway;2. The Norwegian Union of Commerce and Office Employees, Oslo, Norway |
| |
Abstract: | Declining unionization rates and job polarization are two important labor market developments of recent decades. A large body of literature has analyzed these phenomena separately, but little has been done to see whether there is a link between them. We employ a macroeconomic model for a small open economy with a large input–output core to analyze how deunionization may cause job polarization. Our analysis shows that medium-skilled workers are negatively affected by deunionization, mainly as a result of the heterogeneity of the elasticities of substitution between different types of labor. While the elasticities of substitution between high- and medium-skilled labor are relatively low, the elasticities of substitution between medium- and low-skilled are relatively high. As a result, when deunionization leads to increased wage dispersion, we find that demand for low-skilled increases at the expense of medium-skilled labor, thus yielding a more polarized labor market. |
| |
Keywords: | Inequality wage differentials trade unions and technological change |
|
|