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

See all articles by Sudheer Chava

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business

Andras Danis

Georgia Institute of Technology - Scheller College of Business

Alex Hsu

Georgia Institute of Technology - Scheller College of Business

Date Written: December 15, 2017

Abstract

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

Suggested Citation

Chava, Sudheer and Danis, Andras and Hsu, Alex, The Economic Impact of Right-to-Work Laws: Evidence from Collective Bargaining Agreements and Corporate Policies (December 15, 2017). Georgia Tech Scheller College of Business Research Paper No. 18-1. Available at SSRN: https://ssrn.com/abstract=3088612 or http://dx.doi.org/10.2139/ssrn.3088612

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://www.prism.gatech.edu/~schava6/

Andras Danis

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://scheller.gatech.edu/danis

Alex Hsu (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
4043851123 (Phone)

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