Political and Industrial Change in a Model of Trade Union Militancy and Real Wage Growth

Abstract

The paper forwards an analytical formulation of the wage generating process in which trade union militancy and real wage movements interact. Key features of the advanced model are (1) a clarification of the role of macropolitical variables and of changing industrial composition in the wage determination process and (2) a simple explanation of why increasing unemployment and accelerating real wage growth may raise trade union militancy. The empirical results obtained for West Germany support the proposed model and stress the importance of treating labor militancy as a latent, unobservable variable which relates to multiple indicators and may be subject to measurement errors.

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