Abstract
It is a common observation that unions often try to compress the wage distribution among their members as compared with the productivity distribution. A troublesome aspect of standard theories of redistributive unions is the question why high-productivity workers choose to enter the union in the first place. This paper develops and explores the implications of an alternative insurance rationale for egalitarian wage objectives. Apart from providing a simple explanation of why heterogeneous union members may agree on egalitarian wage policies, it also suggests a more guarded attitude toward the welfare costs of pay compression. Copyright 1992 by The London School of Economics and Political Science.
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