Deunionization and job polarization – a macroeconomic model analysis for a small open economy
Journal article, Peer reviewed
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Original versionThomas von Brasch, Marit Linnea Gjelsvik & Victoria Sparrman (2018) Deunionization and job polarization – a macroeconomic model analysis for a small open economy, Economic Systems Research, 30:3, 380-399, DOI: 10.1080/09535314.2018.1468738 https://doi.org/10.1080/09535314.2018.1468738
Declining unionization rates and job polarization are two important labor market developments of recent decades. A large body of literature has analyzed these phenomena separately, but little has been done to see whether there is a link between them. We employ a macroeconomic model for a small open economy with a large input–output core to analyze how deunionization may cause job polarization. Our analysis shows that medium-skilled workers are negatively affected by deunionization, mainly as a result of the heterogeneity of the elasticities of substitution between different types of labor. While the elasticities of substitution between high- and medium-skilled labor are relatively low, the elasticities of substitution between medium- and low-skilled are relatively high. As a result, when deunionization leads to increased wage dispersion, we find that demand for low-skilled increases at the expense of medium-skilled labor, thus yielding a more polarized labor market.