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Taking as the authors' point of departure a model proposed by David Card (2001), they suggest new methods for analyzing wage dispersion in a partially unionized labor market. Card's method disaggregates the labor population into skill categories, which procedure entails some loss of information. Accordingly, they develop a model in which each worker individually is assigned a union-membership probability and predicted union and nonunion wages. The model yields a natural three-way decomposition of variance. The decomposition permits counterfactual analysis, using concepts and techniques from the theory of factorial experimental design.
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