Employer size, union strength, and their effects on wage rates
Yeatman, John Darrel
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The purpose of this paper is to estimate the impact of union strength on wages at different levels of employer size in a framework that corrects for sample selection bias. Previous research using adjusted ordinary least squares (OLS) estimates has determined that the effect of union strength on wages increases with employer size in the nonunion sector, but is fairly constant with respect to size in the union sector. If a nonrandom sorting process matches workers to sector of employment, then wage equations estimated by OLS wiU suffer from sample selection bias. This paper corrects the selectivity problem by using Lung-Fei Lee's model which, in addition to union and nonunion wage equations, includes a union status equation determining sector of employment.