The Role of Labor Unions in Immigrant Integration

We examine if unions narrow or widen labor market gaps between natives and immigrants. We do so by combining rich Norwegian employer-employee matched register data with exogenous variation in union membership obtained through national government policies that differentially shifted the cost to workers to join a union. While union membership significantly improves the wages of natives, its positive effects diminish substantially for Western immigrants and disappear almost entirely for non-Western immigrants. The effect of unions on native wages, and the role of unions in augmenting the native-immigrant wage gap, is nonexistent in competitive labor markets while it is substantial in markets characterized by a high degree of labor concentration. This implies that unions act as a countervailing force to employer power in imperfect markets and can ameliorate the negative labor market effects of labor market concentration, but only for natives. Using unions as a means to empower workers and solve market failures caused by imperfect competition in the labor market, therefore, is likely to lead to a significant increase in societal inequality

The Effect of Labor Market Competition on Firms, Workers, and Communities

This paper isolates the impact of labor market competition on firms, workers, and communities. A shock to labor mobility from Sweden to Norway caused a substantial increase in labor competition for Swedish firms on the border with Norway. Using unique register data linked across the two countries, we show that Swedish firms respond by raising wages and reducing their workforces. The retained workers are of lower quality, resulting in a drop in value added and an increasing probability of market exit. Communities experience population flight, declining business activity, increased inequality, and increased support for worker protection parties. Norwegian firms benefit through cheaper labor costs, and there is evidence of Norwegian workers being displaced. The communities see increased support for anti-integration parties. We conclude that shocks to labor market competition, while benefiting certain workers, may have detrimental effects on local communities due to adverse effects on firm survival and business activity

How Do Firms Respond to Unions?

This paper provides a comprehensive assessment of the margins along which firms in Norway respond to increased union density, using legislative changes in the tax deductibility of union dues as a quasi-exogenous shock to firm-level unionization rates. Despite higher personnel costs driven by a union wage premium, the average manufacturing firm increases employment and scales up production, charges higher prices in the product market, enjoys higher nominal value added per worker, and experiences no decrease in profits. We show that this result is a direct implication of the labor- and product-market power that the average manufacturing firm possesses, in combination with a reallocation of inputs and industry revenue shares from smaller and less unionized firms to larger and more unionized firms. Larger firms are, therefore, increasing employment and output at the same time their ability to mark up prices is growing, thereby preventing negative profit effects. For the broader private sector in which firms do not hold much price- or wage-setting power, we observe the opposite result: the average firm reduces employment and profit falls. We synthesize these findings through a partial-equilibrium model of firm decision-making that incorporates union bargaining, product-market price-setting power, and labor market monopsony power

WP 2016-351

This paper examines how the extraction of home equity, including but not limited to equity extracted through reverse mortgages, affects credit outcomes of senior households. We use data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, supplemented with our unique credit panel dataset of reverse mortgage borrowers. We track credit outcomes for seniors who extracted equity through cash-out refinancing, home equity lines of credit or home equity loans between 2008 and 2011, and a random sample of nonextractors. We estimate differences-in-differences by extraction channel using individual, fixed-effects panel regression. We find that seniors extracting equity through reverse mortgages have greater reductions in consumer debt, and are less likely to become delinquent or foreclose three years post origination relative to other extractors and nonextractors. These effects are greater among households who experienced a credit shock within the two years prior to loan origination. To help isolate the effect of the extraction channel on credit outcomes, we re-estimate our models with a matched sample of consumers at the time of extraction. We find that otherwise similar HECM borrowers have larger reductions in credit card debt post-extraction than other equity borrowers and non-borrowers, with no significant difference in the rates of delinquency on non-housing debt post extraction. For HECM borrowers, we find that increased initial withdrawal and increased monthly cash flow contribute to the reduction in credit card debt.Social Security Administration, RRC08098401, R0UM16-12http://deepblue.lib.umich.edu/bitstream/2027.42/134705/1/wp351.pdfDescription of wp351.pdf : Working pape

The Career Effects of Union Membership

We combine exogenous variation in union membership with detailed administrative data and a novel field survey to estimate the career effects of labor union membership. In the survey, we show how workers perceive the role of unions in setting wages and determining work amenities. In the administrative data, we causally examine through which channels unions influence worker outcomes, whether unions influence workers differently across their careers, and what the overall long-run effects of individual union membership are. Our results highlight that the career effect of union membership differs greatly depending on the age at which workers enroll. In addition, we show that focusing on a restricted set of outcomes, such as wages and employment, generates a fractionalized understanding of the multidimensional career effect that union membership has on workers

Application of SGT Family Distributions in Quasi Maximum Likelihood Estimation

In the classical normal linear regression model, ordinary least squares estimators (OLS) will be consistent and achieve the Cramer-Rao lower bound for any unbiased estimators. This paper examines the impact of several other error distributions on the properties of the OLS estimators. Several different types of example data commonly available to students and researchers in economics are used to illustrate the impact of nonnormality, because, in application, the assumption of normality may not hold in empirical testing. Using maximum likelihood, I demonstrate that flexible probability density functions better model the residual distribution of different types of data, which suggests improvements in estimation accuracy. I find that this suggested increase of fit applies to almost all data types, with the scale of these likelihood improvements contingent upon data characteristics specific to individual data sets. I conclude that consideration of these distributions is essential for truly rigorous analysis and that parsimony applies when differences between estimators are not significant

Essays in Labor and Public Economics

248 pagesThis dissertation contains three essays, each of which uses high-quality data and rigorous econometric methods to further our understanding of key questions in applied labor and public economics. Chapter 1 uses novel data from a sales company whose workers sell pest control services door to door to test for what is called in the behavioral economics literature "reference-dependent preferences." I show that sales workers select daily sales targets based on long-run goals to achieve bonuses paid by the firm at the end of the sales season. I then show that, contrary to standard theory of labor supply, workers substantially reduce their likelihood of continuing to work after achieving their daily sales target holding constant other factors of their work day. This behavior is consistent with loss aversion where workers put forth effort specifically to avoid underperforming relative to their expectations. The results support the theory that narrow goal setting and reference dependence together may act as a commitment device rather than representing a cognitive mistake as standard theory would suggest. These results have broad implications for how firms motivate their workers and show how long-run contract incentives can drive short-run labor supply choices. In Chapter 2, I exploit the 2014 rollout of provisions in the Affordable Care Act to identify the effects of direct subsidies for the purchase of private health insurance on adverse financial outcomes, consumer welfare, and outside parties. I use administrative tax data and credit bureau data to compare outcomes in areas that had high per-capita receipt of these premium tax credits to areas that had low per-capita receipt. To control for pre-treatment differences in trends attributable to the Great Recession, I use a propensity score reweighting and stratification procedure. I find that the premium tax credits substantially reduced the rates of severe mortgage delinquency, consumer bankruptcy, and severe auto delinquency as well as the right tail of the distribution of third-party collections and other debts. I also show that the value of the risk protections against medical debt amount to approximately 10-15% of the cash costs of the subsidies, while the subsidies provided substantial indirect benefits to mortgage lenders, creditors, and hospitals that amount to approximately two-thirds of the subsidy costs. Chapter 3, which is joint work with Michael Lovenheim and Alexander Willén, examines the dynamics of the decline in private-sector unionization rates in the United States over the past 40 years. We take a skill-based approach to studying this decline by accounting for changes in the types of skills covered by unions. We document that, from 1973 to 2017, private-sector unionized jobs shifted toward more non-routine, cognitive skills and fewer routine or manual skills and that women experienced a more pronounced change over this time period than men. After decomposing the changes in skills within the unionized sector to their components, we show that most of the change in unionized worker skills has been driven by the composition of occupations that are unionized rather than within-occupation skill changes. We show how these changes are compatible with a model of skill-biased technological change when we specifically account for the institutional framework surrounding collective bargaining and frictions to union certification or decertification. Finally, we show that accounting for different skills in the unionized sector leads to slightly larger estimates of the union wage premium than shown in the prior literature and that the wage premium remains relatively large for men and women at approximately 20% despite having fallen by over ten percentage points since its peak in the 1980s

Understanding the Decline in Private Sector Unionization: A Skill-based Approach

Private-sector unionization rates have fallen precipitously in the United States over the past half century, from 25% in 1973 to only 7% in 2018. We take a skill-based approach to studying this decline, using data from the Current Population Survey combined with occupation-specific task requirements from the Dictionary of Occupational Titles and the Occupational Information Network. We find that for both men and women, private sector unionized jobs became higherskilled by requiring more non-routine, cognitive skills and fewer manual or routine skills. We further show that union, non-union skill differences have polarized, with unionized worker occupations becoming relatively more intensive in non-routine, cognitive skills and in manual/routine skills. These changes have been more pronounced for women than for men. Next, we decompose these skill changes into three parts: (1) changes in skills within an occupation, (2) changes in worker concentration across existing occupations, and (3) changes to the occupational mix from both entry and exit. Most of the skill changes we document are driven by the second two forces. The third part of the analysis estimates union wage premiums that account for changing skill mix. We find that accounting for skills has a small effect on the union wage premium and that the premium remains high at over 20% for both men and women. Finally, we show how this evidence can be reconciled with a model of skill-biased technological change that explicitly accounts for the institutional framework surrounding collective bargaining

Understanding the Decline in Private Sector Unionization: A Skill-based Approach

Private-sector unionization rates have fallen precipitously in the United States over the past half century, from 25% in 1973 to only 7% in 2018. We take a skill-based approach to studying this decline, using data from the Current Population Survey combined with occupation-specific task requirements from the Dictionary of Occupational Titles and the Occupational Information Network. We find that for both men and women, private sector unionized jobs became higherskilled by requiring more non-routine, cognitive skills and fewer manual or routine skills. We further show that union, non-union skill differences have polarized, with unionized worker occupations becoming relatively more intensive in non-routine, cognitive skills and in manual/routine skills. These changes have been more pronounced for women than for men. Next, we decompose these skill changes into three parts: (1) changes in skills within an occupation, (2) changes in worker concentration across existing occupations, and (3) changes to the occupational mix from both entry and exit. Most of the skill changes we document are driven by the second two forces. The third part of the analysis estimates union wage premiums that account for changing skill mix. We find that accounting for skills has a small effect on the union wage premium and that the premium remains high at over 20% for both men and women. Finally, we show how this evidence can be reconciled with a model of skill-biased technological change that explicitly accounts for the institutional framework surrounding collective bargaining