Risk Aversion and Trade-Union Membership

Abstract

If trade unions provide only their members with insurance against income variations, as a private good, this insurance will provide a stronger incentive for more risk-averse employees to become union members. Using data from the German Socio-Economic Panel (SOEP) and various direct measures of individual risk attitudes, we find robust evidence of a positive relationship between risk aversion and the likelihood of union membership for full-time employees. This association is particularly strong for males and in West Germany.