Whatever happened to the monopoly theory of labor unions?

This paper argues that unions act in accord with the conventional cartel or monopoly model. The basic premise is that it is useful to ask what a “union maximizes” because if more wealth is available, union decision-makers have an incentive to capture it for themselves or their membership. In the formal model, unions negotiate wage rates which maximize the monetary surplus above the supply price of labor, providing an endogenous answer to the questions of how union employment and wages are simultaneously determined. Comparative static analysis yields empirical predictions about the behavior of union employment, wage rates, and union-nonunion wage differentials. I would like to acknowledge helpful comments by Richard Anderson, Ray Battalio, Hugh Macaulay, Michael Ormiston and Akira Takayama on earlier drafts of this paper. The usual caveat applies.