Union Retreat and Regional Economic Performance: the UK in the 1990s

This paper uses a panel of regional data to investigate the impact that the well-documented decline in trade unionism in the UK had on the economic performance of its regions. The analysis employed here departs from the traditional firm-level and cross-sectional analyses and looks at the economy-wide effects of unionism. Our findings provide evidence in line with theory that predicts unions to increase wages and reduce labour demand, leading to higher unemployment, but they also indicate that unionism is positively related to productivity and incomes, although in all cases the effects are non-linear. We conclude that unionism is not necessarily a burden for the economy, so long that the beneficial wage/productivity effects overbalance the negative effects on employment.