Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 1999:8: A Model of Union Formation

Andreas Westermark ()
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Andreas Westermark: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: In an analysis of the formation of unions within a single firm, this paper addresses conditions under which encompassing unions form. It is shown that a production function satisfying decreasing marginal productivity leads to the formation of encompassing unions. This result holds for different ways of dividing the surplus within the union. The effects of changes in heterogeneity, e.g. increased demand for skilled labor, are also analyzed. In the most reasonable setup, a change in heterogeneity does not affect the decision whether to form a union or not. This contrasts with the result in Jun (1989).

Keywords: Union; Heterogeneity; Labor

JEL-codes: D20; D33; J51

38 pages, June 3, 1999

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