We would like to thank Jan Askildsen, Sergio Destefanis, Felix Fitzroy, Jan Rose Skaksen, Robert Rowthorn and, in particular, William Brown and Paul Ryan for many helpful suggestions and comments. Suggestions by two anonymous referees also helped to improve the paper. The usual disclaimer applies.
Unions: Rent Creators or Extractors?*
Article first published online: 12 APR 2005
The Scandinavian Journal of Economics
Volume 107, Issue 1, pages 103–121, March 2005
How to Cite
Skovsgaard Aidt, T. and Sena, V. (2005), Unions: Rent Creators or Extractors?. The Scandinavian Journal of Economics, 107: 103–121. doi: 10.1111/j.1467-9442.2005.00397.x
- Issue published online: 12 APR 2005
- Article first published online: 12 APR 2005
- First version submitted March 2003; final version received May 2004.
- rent creation;
- product market competition
This paper proposes a model of workplace-specific unions that integrates two views of what unions do. One view holds that unions mainly engage in rent extraction. Another view holds that unions mainly engage in rent creation by providing agency services that increase workplace productivity. We demonstrate that the choice between the two activities is systematically related to the economic and regulatory environment in which the union operates. Product market competition encourages rent creation, while labor market deregulation encourages rent extraction. Moreover, we provide a rationale for why firms may want to subsidize unions.