Mizuki Tsuboi

Union workers have earned a positive union wage premium over nonunion workers. Several recent micro-level studies using regression discontinuity designs, however, find that unionization negatively affects wages. To examine whether this negative union wage effect is merely an artifact of specific research designs or reflects a plausible underlying economic mechanism, we develop a simple model of trade unions that features firm heterogeneity and a social insurance system. Our model yields analytically tractable comparative statics and offers a clear testable prediction that greater bargaining power reduces the wage of union workers. Our result thus highlights the importance of accumulating further micro-level evidence that explicitly accounts for these factors to build a consensus of the union wage effect.

To examine whether offshoring widens or narrows wage inequality, we develop a tractable North-South model featuring firm heterogeneity, foreign outsourcing, and vertical specialization. In the baseline model with exogenous firms' outsourcing decisions, we show that increased outsourcing widens wage inequality. In an extended model with endogenous firms' outsourcing decisions, however, outsourcing either widens or narrows wage inequality, depending on the initial level of outsourcing. Using Japanese industry-level data, we then show that–in contrast to most findings for the U.S.–offshoring narrows wage inequality once we account for initial industry-level differences in the extent of outsourcing.