Risk Aversion and Trade Union Membership

26 Pages Posted: 23 May 2008

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics; DIW Berlin - GSOEP; Institute for the Study of Labor (IZA), Bonn

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Abstract

In an open-shop model of trade union membership with heterogeneity in risk attitudes, a worker's relative risk aversion can affect the decision to join a trade union. Furthermore, a shift in risk attitudes can alter collective bargaining outcomes. Using German panel data (GSOEP) and three novel direct measures of individual risk aversion, we find evidence of a significantly positive relationship between risk aversion and the likelihood of union membership. Additionally, we observe a negative correlation between bargained wages in aggregate and average risk preferences of union members. Our results suggest that an overall increase in risk aversion contributes to wage moderation and promotes employment.

Keywords: employment, membership, risk aversion, trade union

JEL Classification: J51

Suggested Citation

Goerke, Laszlo and Pannenberg, Markus, Risk Aversion and Trade Union Membership. IZA Working Paper No. 3351, Available at SSRN: https://ssrn.com/abstract=1135927 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics ( email )

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