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Unions and Income Inequality: A Heterogeneous Panel Co‐integration and Causality Analysis
Author(s) -
Herzer Dierk
Publication year - 2016
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/labr.12075
Subject(s) - causality (physics) , economics , economic inequality , inequality , distribution (mathematics) , income distribution , demographic economics , panel data , labour economics , wage , sample (material) , income inequality metrics , econometrics , mathematics , mathematical analysis , chemistry , physics , chromatography , quantum mechanics
Although a large body of research has examined the effects of unions on the wage distribution, surprisingly little attention has been devoted to the effects of unions on the distribution of income. This paper examines the long‐run relationship between unionization and income inequality for a sample of 20 countries. Using heterogeneous panel co‐integration and causality techniques, we find that (i) unions have, on average, a negative long‐run effect on income inequality, (ii) there is considerable heterogeneity in the effects of unionization on income inequality across countries (in 40 per cent of the cases the effect is positive) and (iii) long‐run causality runs in both directions, suggesting that, on average, an increase in unionization reduces income inequality and that, in turn, higher inequality leads to lower unionization rates.