WHOSE WAGES DO UNIONS RAISE - A DYNAMIC-MODEL OF UNIONISM AND WAGE RATE DETERMINATION FOR YOUNG MEN

We estimate the union premium for young men over a period of declining unionization (1980-87) through a procedure which identifies the alter native sources of the endogeneity of union status, While we estimate t he average increase in wages resulting from union employment to be in excess of 20% we find that the return to unobserved heterogeneity oper ating through union status is substantial and that the union premium i s highly variable. We also find that the premium is sensitive to the f orm of sorting allowed in estimation. Moreover, the data are consisten t with comparative advantage sorting. Our results suggest that the uno bserved heterogeneity which positively contributes to the likelihood o f union membership is associated with higher wages. We are unable, how ever, to determine whether this is due to the ability of these workers to extract monopoly rents or whether it reflects the more demanding h iring standards of employers faced by union wages. (C) 1998 John Wiley & Sons, Ltd.