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Do Unions Improve Workers' Welfare?

Abstract: Based on a survey of 1268 firms in 12 Chinese cities, this paper empirically studies the effect of unions on three important aspects of workers‟ welfare, namely, hourly wage, monthly working hours, and pension coverage. Instrumental variables are used to control for the endogeneity of the status of unions in firms. We find a significant role of unions in improving hourly wage, reducing monthly working hours, and raising pension coverage. These results are robust and hold in the subsample of domestic private enterprises. Furthermore, we establish two mechanisms through which unions improve workers‟ welfare: collective bargaining and written contracts.

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