Did Reducing Unionization Create More Flexible American Industries?

Posted: 12 Oct 2010

See all articles by Lisa Magnani

Lisa Magnani

Macquarie University, Macquarie Business School

David Prentice

Infrastructure Victoria

Date Written: July 1, 2010

Abstract

Do unions really impede manufacturers’ output flexibility? If so, in what ways? The authors propose a methodology for quantifying George Stigler's concept of output flexibility and for decomposing the effects of unionization on average cost differences between union and non-union plants. Using a recently compiled data set on U.S. three-digit manufacturing industries from 1973 to 1996, they adapt this methodology to simulate the effects of unionization on flexibility and average costs for average-size plants. Simulation results indicate that higher unionization was associated with higher average costs and lower flexibility than low unionization. Higher average costs appear to have been primarily due to higher fixed costs, such as higher benefits.

Keywords: Labour Market Institutions, Labour Market Flexibility, Cost Function, Trade Unions, Productivity, Employment, Competitiveness

JEL Classification: D02, D22, J5, J31, P17

Suggested Citation

Magnani, Lisa and Prentice, David, Did Reducing Unionization Create More Flexible American Industries? (July 1, 2010). Industrial and Labor Relations Review, Vol. 63, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=1690608

Lisa Magnani (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

David Prentice

Infrastructure Victoria ( email )

530 Collins St
Melbourne, 3000
Australia

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