| According to most models of unionism, unions organize the most profitable industries. They raise wages and reduce employment in the organized sector. As the disemployed workers move to the nonunion sector, wages for nonunion workers fall. These models take the union and nonunion sectors as given, and assume that, when faced with the threat of unionization, employers behave as in the perfectly competitive case.; This dissertation proposes a theoretical framework in which nonunion employers behave strategically, and in which the incidence of unionism, wages, and employment are determined jointly in equilibrium. The predictions derived from this framework depart substantially from those in conventional models.; In this thesis, firms can prevent unionization by setting higher wages, regardless of their profitability. Greater profitability, if known to workers, does not make unionization more likely: unionization takes place only if it improves efficiency. However, if profitability is known only to firms, inefficient unionization is possible. In contrast to widely held views, less profitable firms are more likely to become unionized, as they may not afford the wages required to avoid organization.; Because increasing employment lowers the wage required to prevent organization, the marginal cost of labor is shown to be less than the wage, and decreasing in employment. Therefore, despite increasing nonunion wages, unions do not reduce nonunion employment. The presence of asymmetric information, however, may induce less profitable firms to reduce employment to convince workers they have little to win if they organize.; The predictions of the theory are confronted, and shown to be consistent with the empirical evidence on the determinants and effects of unionism in the U.S. |
