The Union Wage Effect at the Dawn of the Great Leveling: Evidence from Interwar Sweden

In this paper, I use a new plant-level dataset to investigate the relationship between wages and the regional strength of unions. Using a shift-share or ’Bartik’ instrumental variables approach, I disentangle the causal effect of union strength on wage levels. I find statistically and economically significant, heterogeneous union wage effects for men with the bottom of the distribution being impacted by union density and the top two-thirds being unaffected. I find a negative effect around the median for women and argue that unions, in general, were uninterested in the issues for women and were organizations mostly for men, by men. The paper contributes to the literature by providing the only evidence of a union wage effect in Sweden and, the earliest identified union wage effect anywhere—highlighting the importance of unions in shaping labor market outcomes in the early 20th century and showing that union wage effects have to be understood in their historical context.