published in: German Economic Review, 2004, 5(4), 481-504
In the absence of closed-shops and discriminatory wage policies, union membership can be explained by the existence of social norms. We describe a model, incorporating institutional features of the German labour market, which explicitly allows for social custom effects in the
determination of union membership. Using panel data for Germany, we find evidence for according effects which restrict freeriding. The impact of social norms tends to increase with
net union density. Hence, observed reductions in the demand for union membership can weaken the impact of a norm and accentuate the free-rider problem.
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