Trade Union Density and Inflation Performance: Evidence from OECD Panel Data

This paper examines the impact of union membership rates on inflation in OECD countries. A positive effect of union density is estimated, even after controlling for fixed effects and time dummies. Additional institutional characteristics, for example union coordination, employment protection laws and central bank independence, do not affect inflation directly in a panel setting, but do influence the size of the unionization coefficient via interaction terms. The results are robust to controlling for potential common causes such as oil price shocks and the political stance of the government, and to using GMM/IV techniques to handle possible endogeneity biases. Copyright (c) The London School of Economics and Political Science 2006.