Some Evidence on the Membership Hysteresis Hypothesis in Europe

  • Michael C. Burda
Conference paper
Part of the Studies in Empirical Economics book series (STUDEMP)


In a democratic model of union wage-setting, monopoly unions can induce hysteresis in the behavior of employment, at least locally. As a result, autoregressive representations of employment and membership should contain a unit root even if the determinants of labor demand are stationary. In addition, the model predicts that employment should Granger-cause consumption wages. These implications are tested with data from several European countries. Although there is little conclusive evidence that employment hysteresis constitutes the key difference between the European and US experiences, trade union membership data from the Federal Republic of Germany provides strong support for the membership hysteresis hypothesis in this country.


Unit Root Real Wage Collective Bargaining Median Voter Union Membership 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Abraham K, Medoff J (1985) „Length of Service and Layoffs in Union and Nonunion Groups”. Industrial and Labor Relations Review 38:87–97Google Scholar
  2. Blair D, Crawford D (1984) „Trade Union Preferences and Collective Bargaining”. Quarterly Journal of Economics 99:547–566CrossRefGoogle Scholar
  3. Blanchard O, Summers L (1986) „Hysteresis and the European Unemployment Problem”. NBER Macroeconomics Annual 1:15–78CrossRefGoogle Scholar
  4. Blythe C (1979) „The Interactions between Collective Bargaining and Government Policies in Selected Member Countries”. In Collective Bargaining and Government Policies, Paris: OECDGoogle Scholar
  5. Bruno M, Sachs J (1985) The Economics of Worldwide Stagflation. Cambridge: Harvard University PressGoogle Scholar
  6. Burda M (1987) Essays on the Rise of Unemployment in Europe. PhD dissertation Harvard UniversityGoogle Scholar
  7. Burda M (1990) Membership, Seniority, and Wage Setting in Democratic Labor Unions”. forthcoming EconomicaGoogle Scholar
  8. Burda M, Sachs J (1988) „Assessing High Unemployment in the Federal Republic of Germany”. World EconomyGoogle Scholar
  9. Coe D (1989) „Insider-Outsider Influences on Industry Wages: Evidence from Fourteen Industrialized Countries”, mimeoGoogle Scholar
  10. Farber H (1986) „The Analysis of Union Behavior”, Chapter 18 in Ashenfelter and Layard, eds., Handbook of Labor Economics. Amsterdam: North-HollandGoogle Scholar
  11. Faxén K (1982) „Incomes Policy and Centralized Wage Formation”. In A. Boltho, ed., The European Economy: Growth and Crisis. Oxford: Oxford University Press: 365–389.Google Scholar
  12. Flanagan R, Soskice D, Ullman L (1983) Unionism, Economic Stability and Incomes Policies: the European Experience. Washington: Brookings InstitutionGoogle Scholar
  13. Fuller W (1976) Introduction to Statistical Time Series. New York: John Wiley and SonsGoogle Scholar
  14. Geary P, Kennan J (1982) „The Employment-Real Wage Relationship: An International Study”. Journal of Political Economy 90:854–871Google Scholar
  15. Gordon R (1977) „World Inflation and Monetary Accomodation in Eight Countries”. Brookings Papers on Economic Activity 2:409–468CrossRefGoogle Scholar
  16. Gordon R (1982) „Why US Wage and Employment Behavior Differs from that in Britain and Japan”. Economic Journal 92:13–44.CrossRefGoogle Scholar
  17. Gottfries N, Horn H (1987) „Wage Formation and the Persistence of Unemployment”. Economic Journal 97: 877–886CrossRefGoogle Scholar
  18. Grossman G (1983) „Union Wages, Seniority, and Unemployment”. American Economic Review 73:277–290.Google Scholar
  19. Grubb D (1984) „The OECD Data Set”. LSE Centre for Labour Economics Working Paper no 615Google Scholar
  20. Lindbeck A, Snower D (1984) „Involuntary Unemployment as an Insider-Outsider Dilemma”. Seminar Paper No. 282, Institute of International Economic Studies, University of Stockholm McDonald I,Google Scholar
  21. Solow R (1981) „Wage Bargaining and Employment“. American Economic Review 71:896–908Google Scholar
  22. Nelson C, Plosser C (1982) „Trends and Random Walks in Macroeconomic Time Series“. Journal of Monetary Economics 10: 139–162CrossRefGoogle Scholar
  23. Oswald A (1982) „The Microeconomic Theory of the Trade Union“. Economic Journal 92:576–595CrossRefGoogle Scholar
  24. Oswald A (1984) „Efficient Contracts are on the Labour Demand Curve: Theory and Facts“. mimeo, Princeton UnversityGoogle Scholar
  25. Oswald A, Turnbull P (1985) „Pay and Employment Determination in Britain: What are Labor Contracts Really Like?“ Oxford Review of Economic Policy 1:80–97CrossRefGoogle Scholar
  26. Perry G (1975) „The Determinants of Wage Inflation around the World“. Brookings Papers on Economic Activity 2:403–435CrossRefGoogle Scholar
  27. Poterba J, Summers J (1988) „Mean Reversion in Stock Prices: Evidence and Implications“. Journal of Financial Economics 22: 27–59CrossRefGoogle Scholar
  28. Sachs J (1979) „Wages, Profits and Macroeconomic Adjustment: A Comparative Study”. Brookings Papers on Economic Activity 2:269–319CrossRefGoogle Scholar
  29. Sen A (1970) Collective Choice and Social Welfare. San Francisco: HoldenGoogle Scholar
  30. Simons H (1944) „Some Reflections on Syndicalism“. Journal of Political Economy 52:1–25CrossRefGoogle Scholar
  31. Solow R (1985) „Insiders and Outsiders in Wage Determination“. Scandinavian Journal of Economics 87:411–428CrossRefGoogle Scholar
  32. Soltwedel R (1984) „Staatliche Interventionen am Arbeitsmarkt: Eine Kritik“. Doctoral dissertation, Christian-Albrecht-Universität zu KielGoogle Scholar
  33. Soltwedel R (1987) „Employment Problems in West Germany — The Role of Institutions, Labor Law and Government Intervention“. Paper presented to the Carnegie-Rochester Conference on Public PolicyGoogle Scholar
  34. Spitäller E „Semi-Annual Wage Equations for the Manufacturing Sector in Six Major Industrial Countries“. Weltwitschaftliches Archiv 112: 300–337Google Scholar

Copyright information

© Physica-Verlag Heidelberg 1990

Authors and Affiliations

  • Michael C. Burda
    • 1
  1. 1.INSEADFontainebleauFrance

Personalised recommendations