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ABSTRACT This paper examines the change in union wage differentials in Britain between 1984 and 1990, a period of considerable legislative change and marked decline in unionization. Small falls in union differentials are found for manual workers, together with a sharp decline in the premium associated with, and incidence of, the pre‐entry closed shop. The decline in the average differentials is found to be largely due to the inability of unions to establish differentials in new establishments. No link is found between the differential and the probability of closure and no evidence of decline in raw differentials in a matched panel.
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