Unionization and the partisan effect on income inequality

Abstract

Does partisanship matter for income inequality? The empirical evidence is notably mixed. I argue that these inconsistent findings are partly the result of scholars not (properly) modeling the relationship between unionization and the partisan composition of government. If we accept that union members favor greater government intervention to reduce economic inequalities than non-union members, politicians desire to hold elected office and be popular but also to implement particular public policies, and left party politicians share union members' policy preferences to a greater extent than center and right party politicians, then partisan differences should be greatest at moderate levels of unionization, a condition that allows all politicians to pursue their policy preferences while maintaining electoral viability. The empirical analysis examines 16 wealthy democracies between 1970 and 2010. The results of error-correction models confirm the theoretical expectation and hold regardless of whether there is a majoritarian or proportional representation electoral system.

The impact of trade unions and government party orientation on income inequality: evidence from 17 OECD economies

“…Finally, interaction effects between right or left (but not centre) political parties in power and union density are confirmed since the respective interaction terms are significant and bear the expected signs. In this context, Castater (2015) provided evidence according to which moderate levels of unionization vis-à-vis lower and higher levels, experience more of a partisan effect on income inequality.…”

“…Finally, interaction effects between right or left (but not centre) political parties in power and union density are confirmed since the respective interaction terms are significant and bear the expected signs. In this context, Castater (2015) provided evidence according to which moderate levels of unionization vis-a-vis lower and higher levels, experience more of a partisan effect on income inequality. Regarding the control variables, unemployment, GDP per capita growth, R&D, education, and banking crises, are found to be highly significant, whereas trade and inflation are significant at the 10% level only.…”