Essays in the Economics of Collective Bargaining and Labor Market Power

This dissertation consists of three empirical research studies that broadly pertain to the economics of collective bargaining, or the process by which employees act through labor unions to negotiate with employers over compensation, benefits, and other terms and conditions of employment; and of labor market power, which refers to the ability of economic actors to set wages and employment at levels different from those that would obtain under a theoretical ideal of perfect competition, wherein both workers and firms are atomized agents with no unilateral ability to influence a market equilibrium. The first chapter, entitled "The Effects of Union Membership on Inequality and Well-Being in Retirement," uses data from the Health and Retirement Study (HRS) and an empirical design based on comparisons of older workers who switch into or out of union employment in the years before retirement with otherwise similar peers to study the effect of union membership on various outcomes in old age, including pension income and income from other sources, wealth, consumption, time use, mortality, morbidity, and inequality. Our notable findings include a pension income premium for workers who retire as union members of approximately 10-20%, similar to estimates of the union wage premium; evidence of larger premia for retirees at lower quantiles of the pension income distribution, which mirrors existing research on how unions exert a compressive effect on the distribution of wages for current workers; and a reduction in the annual mortality rate for union retirees of around 1.25%, comparable to estimates of the mortality differential between the lowest- and highest-income individuals in the same age category. We further attempt to distill the multidimensional effects of union membership in retirement into a single measure of impact on well-being using the concept of "consumption-equivalent welfare," and estimate that the subsequent lifetime welfare of those who retire from nonunion jobs is on the order of 50-60% that of those who retire from union jobs, depending on the precise assumptions and methodology employed. The second chapter, coauthored with Leonard Goff, is entitled "Monopsony in Minnesota: Rent-Sharing and Labor Supply Consequences of a Nursing Home Reimbursement Reform." Models of static labor market monopsony predict that rent-sharing, or pass-through from firm productivity or marginal revenue shocks into workers' wages, is one consequence of labor markets being less than perfectly competitive. In this study we consider a 2016 reform to the state of Minnesota's Medicaid reimbursement scheme for residents of nursing homes that introduced so-called value-based reimbursement, and make use of data on facilities' wages, employee separations, and revenue from various sources to simultaneously estimate both rent-sharing and firm-level labor supply elasticities. In our most-preferred two-stage least squares specifications we find rent-sharing elasticities on the order of 0.10-0.25, suggesting that pass-through is substantially greater than indicated by naive OLS estimates of the same, and we confirm these results through an alternative methodology based on "seemingly unrelated regressions." With the same approach we also obtain an estimate of the average labor supply elasticity facing nursing homes of around 5, corresponding to an optimal wage markdown below marginal revenue product of roughly 15%. Furthermore, subgroup analyses by occupation, union status, and local labor market concentration show little evidence of an effect of collective bargaining on rent-sharing but more convincing indications that rent-sharing is greater in occupations or commuting zones that are characterized by lower labor supply elasticity - a fact that we show can be rationalized with a model of monopsony in which firms have isoelastic production functions. The third and final chapter, coauthored with Brendan Moore and Suresh Naidu, is entitled "Right-to-Work and Union Decline in the United States: Evidence from a Novel Dataset on County-Level Union Membership." Labor union membership and union density in the United States have fallen substantially in recent decades, in particular in the private sector. The causal contribution of state-level "right-to-work" (RTW) laws, which prohibit collective bargaining agreements from requiring union membership as a condition of employment, has been heavily debated. However, research on the role of RTW in accounting for these trends has been stymied by a paucity of data on union membership at a fine geographic level. Using a LASSO selection model and data from several different administrative and survey-based sources, we construct a novel dataset on county-level membership and density and use it to reexamine the consequences of RTW. We show that RTW has a highly significant negative effect in this regard, and we establish that the impact of these laws is felt most strongly in those counties that are the most highly-unionized at the start of our sample period. On average we find that density is reduced by about an additional 0.4 percentage points for every one percentage point increase in its initial value in 1991. However, counties at or below the median initial density see little to no change, while density declines by about 7 percentage points following the passage of RTW for those in the uppermost decile. We also present evidence from an event-study analysis which shows that the effect of RTW grows over time, with the full impact only being felt about a decade after enactment. Taken both individually and collectively, these three essays serve to advance an understanding of the determinants and consequences of union membership and monopsony power. In addition to making original contributions to the fields of applied labor economics and labor studies, it is our hope that they also offer frameworks upon which future research in these areas can build