Unions are one of the most important institutions in labor markets, and are capable of
affecting workers (wages) and employers (performance). Despite the relevance unions have had
worldwide, most of the literature has concentrated on the economic effects of unions in the U.S.
and other developed countries, with few studies concentrating on what unions do in developing
countries.
Because developing countries have contrasting differences compared to developed
countries, in terms of economic development, legal settings and institutions, it is possible that
conclusions reached in the broader literature might not be appropriate in the framework of
developing countries. This dissertation aims to fill this gap in the literature studying the
economic effects of unions on wages and performance in selected developing countries in Latin
America: Argentina, Bolivia, Chile, Mexico, Panama and Uruguay.
The first essay focuses on the impact of unions on wages distribution in Bolivia and
Chile, using the novel Recentered Influence Function decomposition. Although both countries
have considerably different levels of economic development and institutions, the estimations
indicate unions have similar effects increasing wages and reducing wage inequality at the top of
the distribution. These results are similar to those found replicating the methodology using U.S.
data. The results suggest that the common economic and political forces that govern the role of
unions as collective bargaining units transcend other contextual differences in these countries.
The second essay analyzes the impact of unions on economic performance of
establishments in the manufacturing sector in Argentina, Bolivia, Chile, Mexico, Panama and
Uruguay. Using an augmented Cobb Douglas production function, the essay finds that unions
x
have a positive, but small, effect on productivity, with the exception of Argentina. Analyses on
alternative measures of performance show that, for most cases, the positive productivity effects
barely offset the higher union compensation; that unions show no relationship with sales growth;
and that unionized establishments usually reduce investment in capital and R&D. While no
single narrative can explain all observed effects across countries, the results provide a step
forward to understand the role of unions on economic performance in developing countries.