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  5. Union Bargaining Power and the Amenity-Wage Tradeoff

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Union Bargaining Power and the Amenity-Wage Tradeoff

  • Lorenzo Lagos
American Economic Review (Forthcoming)

Abstract

This paper studies how collective bargaining affects wages and amenities. By merging collective bargaining agreements (CBAs) to linked employer-employee data in Brazil, I combine rich contracted amenities with wage information. I implement a difference-in-difference strategy that exploits a court ruling enforcing CBA continuation (i.e., ultractivity) to estimate the effects of union bargaining power. Strengthening unions raises wages and amenities without reducing employment—increasing retention despite some labor-labor substitution. A revealed preference approach shows that amenities account for 45% of total compensation gains. These findings suggest that collective bargaining can offset monopsony power, but employers retain the right-tomanage workforce composition.

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