Seminars

This paper examines the equilibrium impacts of labor unions on labor market outcomes, as well as the forces underlying the dramatic decline in the unionization rate in the United States in the past half-century. We first document that unionized firms are more likely to provide various employer-based insurance benefits, and we provide quasi-experimental evidence that the expansion of public insurance programs lowers unionization rates and union formation in the U.S. We then develop and estimate a frictional labor market model with endogenous union formation that accounts for their effects on wages, job security, and provisions of employment-based insurance benefits. Using the estimated model, we find that social insurance expansion and the tax/transfer programs on non-wage benefits can have a significant impact not only on unionization but also on wage inequality through their effects on unionization. Moreover, we find that skill-biased technological changes and the implementation of right-to-work laws account for about 32% and 7% of the union decline, respectively. Interestingly, social insurance expansions also account for about 15% of the union decline.