Munich Personal RePEc Archive

Labor Union and the Wealth-Income Ratio

Chu, Angus C. and Kou, Zonglai and Liu, Xueyue (2017): Labor Union and the Wealth-Income Ratio. Forthcoming in: Economics Letters

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Abstract

We explore how labor union affects the wealth-income ratio in an innovation-driven growth model and find that it depends on the union's objective. If the union is employment-oriented (wage-oriented), then a decrease in its bargaining power would have a positive (an ambiguous) effect on the wealth-income ratio. Calibrating the model to data, we find that a decrease in union bargaining power causes a sizable increase in the wealth-income ratio, which explains at least one-third of the increase in the US wealth-income ratio.

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