A new econometric model of union threat effects

Abstract

The union threat effect is the propensity of non-union employers to resist union organization by raising wages. This study introduces an empirical model of the non-union employer's optimal wage in the presence of threat effects. Estimates of an equation of a firm's unionization probability provide key variables. Unlike previous models, this specification dervies directly from a theoritical model, separstes threat effects from the influence of other union-non-union spillovers and efficiency wages and includes many factors affecting the probability of unionization. Wage equation estimates reveal that the predicted threat of unionization did not significantly raise non-union wages in the United States in 1980.