The Economic Impact of Right-to-Work Laws: Evidence from Collective Bargaining Agreements and Corporate Policies
91 Pages Posted: 20 Dec 2017 Last revised: 1 Aug 2019
Date Written: December 15, 2017
We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.
Keywords: Right to Work, Collective Bargaining, Unions, Wage Growth, Investment
JEL Classification: J31, J50, G31, G32, G38
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