Union Bargaining Power and the Amenity-Wage Trade-Off

This paper studies how collective bargaining affects wages and amenities. By merging collective bargaining agreements (CBAs) to linked employer-employee data in Brazil, I combine rich contracted amenities with wage information. I implement a difference-in-differences strategy that exploits a court ruling enforcing CBA continuation (i.e., ultra-activity) to estimate the effects of union bargaining power. Strengthening unions raises wages and amenities without reducing employment—increasing retention despite some labor-labor substitution. A revealed-preference approach shows that amenities account for 45 percent of total compensation gains. These findings suggest that collective bargaining can offset monopsony power, but employers retain the right-to-manage workforce composition. (JEL J31, J32, J42, J51, J52, O15)

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Publication Details

Journal
American Economic Review
Published
2026-10-30
DOI
https://doi.org/10.1257/aer.20240766
Primary Topic
Labor market dynamics and wage inequality
Type
article
Field-Weighted Citation Impact
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article

Union Bargaining Power and the Amenity-Wage Trade-Off

Lorenzo Lagos
1 links
American Economic Review
Labor market dynamics and wage inequality
article

Union Bargaining Power and the Amenity-Wage Trade-Off

Lorenzo Lagos
article en

Abstract

This paper studies how collective bargaining affects wages and amenities. By merging collective bargaining agreements (CBAs) to linked employer-employee data in Brazil, I combine rich contracted amenities with wage information. I implement a difference-in-differences strategy that exploits a court ruling enforcing CBA continuation (i.e., ultra-activity) to estimate the effects of union bargaining power. Strengthening unions raises wages and amenities without reducing employment—increasing retention despite some labor-labor substitution. A revealed-preference approach shows that amenities account for 45 percent of total compensation gains. These findings suggest that collective bargaining can offset monopsony power, but employers retain the right-to-manage workforce composition. (JEL J31, J32, J42, J51, J52, O15)

American Economic ReviewVol. 116(11)
National Bureau of Economic Research (US), IZA - Institute of Labor Economics (DE), Brown University (US)
Decent work and economic growth
Openalex Percentile: Top 8%
Labor market dynamics and wage inequality
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