Trade union behaviour and inter-regional variations in unemployment rates

An important problem in the political economy of the UK is that the disparity of unemployment rates across its regions is much more marked than the corresponding dispersion of wage rates. One possibility is that this is due to the attitude of trade unions to their members in different regions. If unions wish to preserve parity between members in different regions then they will value wage equality between regions over and above wage levels. This may then persuade them to overlook inter-regional productivity differences in setting wages. The price that low-efficiency regions will then pay for this desire for wage equality is higher unemployment rates.Much of the research for this paper was carried out while the author was visiting the Trade Union Economics Research Institute (FIEF), Stockholm in 1989. An earlier version of this paper was presented at a seminar there and the author is gratefully to Villy Bergstrom, Paul Chen, Douglas Hibbs, Eva Udden-Jondal and other institute members for several useful comments. Comments from Kevin Lee, John Spencer and an anonymous referee have also substantially improved the paper. The usual disclaimer applies.