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Sources of the Union Wage Gap: Results from High-Dimensional Fixed Effects Regression Models
John T. Addison
J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
J33 - Compensation Packages; Payment Methods
J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
J51 - Trade Unions: Objectives, Structure, and Effects
J52 - Dispute Resolution: Strikes, Arbitration, and Mediation
We estimate the impact of union density on wages using matched employer-employee contract data for Portugal. We extend omitted variable bias decomposition procedure of Gelbach (2016) to obtain the contribution of worker, firm, and job-title heterogeneity to the union wage premium. The principal result is the dominance of the allocation or workers among firms with different wage policies. The unobserved skills of union workers have a modest impact on wages; unions do not place their members into higher job-titles along the job career hierarchy; the wage cushion enables firms to partially undo the bargained wage; and, while fringes matter, matching does not.