Union Membership and Employment Dynamics: The Role of the Union Objective Function

Abstract

This paper studies the behaviour of a labour union in a model with employment and membership dynamics. It is known from the literature that the relative level of employment between intertemporal and static union models is affected by the structure of the union density function. We show that this result does not hold in general but rather that it depends on the union objective function. If the union maximises the wage bill of their members, employment in the intertemporal model will differ from employment in the static model depending on the union density function. However, if the union maximises the rent from unionisation, the intertemporal model will yield the same level of employment as the static model regardless of the union density.