Financial Resilience in Labor Negotiations

99 Pages Posted: 19 Mar 2021 Last revised: 21 Nov 2022

See all articles by Carlos F. Avenancio-León

Carlos F. Avenancio-León

University of California, San Diego (UCSD)

Alessio Piccolo

Indiana University - Kelley School of Business

Roberto Pinto

Lancaster University Management School

Date Written: January 6, 2021

Abstract

Financial obligations may improve firms' bargaining position with labor by pushing money off the negotiation table. However, financial obligations make firms vulnerable to default during worker strikes, which hampers their ability to negotiate with labor. We formalize this tension in a dynamic model of bargaining. Evaluating labor negotiations, right-to-work laws, and union election events, we show that firms shape their financial obligations to gain resilience to strikes. We show that by increasing firm resilience to negative cash flow shocks, stronger worker protections reduce employment vulnerability. In contrast, the passage of right-to-work laws may have increased employment vulnerability by reducing firm resilience.

Keywords: labor unions, right-to-work laws, bargaining, debt structure.

JEL Classification: G32, J51, C78.

Suggested Citation

Avenancio-León, Carlos F. and Piccolo, Alessio and Pinto, Roberto, Financial Resilience in Labor Negotiations (January 6, 2021). Kelley School of Business Research Paper No. 2021-22, Available at SSRN: https://ssrn.com/abstract=3760854 or http://dx.doi.org/10.2139/ssrn.3760854

Carlos F. Avenancio-León

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Alessio Piccolo (Contact Author)

Indiana University - Kelley School of Business ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
+18123914734 (Phone)

HOME PAGE: http://https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=APICCOL

Roberto Pinto

Lancaster University Management School ( email )

Bailrigg, Lancaster
Lancaster, LA1 4YX
United Kingdom

HOME PAGE: http://sites.google.com/view/roberto-pinto/home

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
196
Abstract Views
1,140
rank
226,518
PlumX Metrics