A Theory of Union Power and Labor Turnover.

In this paper we develop a theory of union power based on the aggregation of bargaining power of individual workers with firm specific skills. Union power depends on the ease of replacement from internal and external labor markets. Unions increase the bargaining power of insiders only in states of the world in which the firm would like to retain insiders but not hire outsiders. We show that union formation leads to inefficient retention of workers in the firm.