Risk Aversion and Trade-Union Membership


  • We are grateful for the helpful comments received from Momi Dahan, Thomas Dohmen, Frank Fossen, Carsten Hefeker, Thomas Siedler, Uwe Sunde, two anonymous referees, and the participants of seminars in Berlin, Kiel, Siegen, and Tuebingen, as well as at the Collegio Alberto (Torino), the CESifo Area Conference on Employment and Social Protection 2007, EALE 2007, ESPE 2008, EEA 2008, and the SOEP User Conference 2008. We are responsible for all remaining errors and inadequacies.


If trade unions provide only their members with insurance against income variations, as a private good, this insurance will provide a stronger incentive for more risk-averse employees to become union members. Using data from the German Socio-Economic Panel (SOEP) and various direct measures of individual risk attitudes, we find robust evidence of a positive relationship between risk aversion and the likelihood of union membership for full-time employees. This association is particularly strong for males and in West Germany.