Labor Economics
Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Chapter 10, Problem 1RQ
To determine

Explain the factors accounted for the decline in the private sector unionism and rapid increase in the public sector unionism.

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Explanation of Solution

The factors accounted for the decline in the private sector unionism since 1960’s can be listed as follows.

  • Use of yellow-dog contract by the employers: this contract prohibited the joining of new labors in the union. The restrictions faced by the labors lead to a decline in the private sector unionism.
  • During the middle of 1960’s, the wages of workers in the private sector begin to rise. This also becomes a reason of decline in the private sector unionism.
  • Corruption by the union leaders: the increased corruption among the union leaders pulls down the faith of union members on union.

The factors accounted for the rapid increase in the public sector unionism during the same period can be listed as follows.

  • Collective bargaining power over wages.
  • Good working and achieved benefits of the members.
  • Provided job securities.
  • Representing members in any dispute, if it necessary.

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Problem 1-Experiments/Randomized Control TrialSuppose you are interested in studying the effect of being a part of the labor union on anindividual’s hourly wage.You collect data on 1000 people and run the following regression. where is a dummy variable which is equal t to 1 for people who are a part of labor union and0 for others. a. Suppose you estimate . Interpret b. Do you think is biased or unbiased? Explain. Now suppose you conduct a randomized control trial to answer the same question. Yourandomly assign some individuals to be a part of the labor union and others to not be a partof the labor union. The first step you take is to ensure that the randomization was donecorrectly. Then you estimate the following equation: =1 if the student is assigned to be a part of Labor Union=0 if the student is assigned to not be a part of Labor Union c. Why is it important to ensure that the randomization is done correctly? d. Name any two variables that you can use to test if Treatment and…
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