Comparisons Between Public and Private Sector Union Wage Differentials: Does the Legal Environment Matter

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Estimates of public sector union wage differentials are typically smaller than estimates of private sector union wage differentials. This study investigates the extent to which this reflects the differences in legal environments which govern bargaining in each sector. Public sector unions in many states must bargain with fewer legal rights than their private sector counterparts. In the extreme, public sector bargaining is prohibited by law. The estimation procedure takes into account the possible endogeneity of the bargaining law variables in a way which differs from previous studies. Random effects models are estimated and Hausman tests carried out to test for correlation between the state-specific error component and the independent variables. Preliminary analysis on data taken from the l977 May Current Population Survey indicates that the legal environment is not a key factor in explaining the small public sector union wage differentials.