Union-nonunion wage differentials revisited

A reverse regression method of estimating the union-nonunion wage differential is developed using a multiple indicator model. The method provides a test for the multiple indicator model’s validity and suggests that conventional estimation techniques should underestimate the union-nonunion differential. Empirical estimates show that the reverse regression estimates are larger than conventional estimates and that the multiple indicator model cannot be rejected. The author wishes to thank Robert J. Flanagan and H. G. Lewis for their valuable comments on earlier versions of this paper.