Investment and Union Certification
Federal Reserve Bank of Cleveland - Research Department
Kevin A. Hassett
American Enterprise Institute (AEI)
Board of Governors of the Federal Reserve System Finance and Econ. Disc. Series 96-43
A growing body of work--both theoretical and empirical--has emphasized that unionization may be better understood as a tax on capital rather than a tax on labor. Under this "new" view, unionization unambiguously lowers investment. Using data on union certification elections, we estimate the impact of unionization on firms' investment behavior. Employing both a standard q-model and an "investment surprises" technique, we find that union certification significantly reduces investment. We find that a winning certification election has, on average, about the same effect on investment as would a 30 percentage point increase in the corporate tax.
JEL Classification: J51, D24
Date posted: December 11, 1996