How collective bargaining shapes poverty: New evidence for developed countries

Although many studies point to the significant influence of collective bargaining (CB) institutions on earnings inequalities, evidence how these shape poverty rates across developed economies remains surprisingly scarce. This paper explicitly addresses relationship between CB systems and working-age before after taxes transfers in 24 countries over period 1990–2015. Our results show that with a more centralized system, extended coverage rate and/or higher trade union density display significantly lower rates. However, only hold post-tax benefit scenario. Controlling for country time fixed effects wide range covariates, our estimates indeed suggest poverty-reducing effect stems from political strength unions promoting public social spending rather than any direct inequalities. Sensitivity tests endogeneity overlapping samples support this conclusion.