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RESEARCH PRODUCT

Institutions, Incentives and Trade Union Membership

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The study investigates the determinants of unionization in a country — Finland — where union density, defined as the number of unionized members divided by the labour force, has risen 60 percentage points in 32 years, from 22 percent in 1960 to 82 percent in 1992. The theoretical framework of the study is based on the background information obtained from surveys inquiring why individuals join a union. The empirical analysis for the period 1962–92 shows that the model is capable of explaining long-run trends in union density in a very satisfactory manner. The results imply that institutional features of the labour market, characterized by the benefit mark-up variable and a dummy variable capturing labour legislation and public policy toward unionization, play an important role in the development of union density. An interesting policy implication of the study is the prediction that union density would fall considerably if earnings-related unemployment allowances were to be cut to the level of the basic unemployment allowances.