Public Sector Unions and Government Financing

55 Pages Posted: 8 Apr 2022 Last revised: 19 May 2022

See all articles by Qian He

Qian He

Lingnan University - Department of Finance and Insurance

Sibo Liu

Hong Kong Baptist University

Lai Wei

Lingnan University - Department of Finance and Insurance

Date Written: March 28, 2022

Abstract

Unions play a significant role in the U.S. public sector. In this paper, we use a Supreme Court’s ruling that diminished the power of public sector unions exogenously in certain states to examine the effect on government financing costs. We find that the decrease in public sector union power reduces the financing cost of government, as indicated by lower municipal bond yields. The effect is more pronounced in states with high unionization rates or heavy pension liabilities. We confirm the robustness of our results over a longer window using the staggered adoption of “right-to-work” law across states as well.

Keywords: Government financing, public sector, labor unions, Supreme Court decision

JEL Classification: G12, H74, J51

Suggested Citation

He, Qian and Liu, Sibo and Wei, Lai, Public Sector Unions and Government Financing (March 28, 2022). Available at SSRN: https://ssrn.com/abstract=4067957 or http://dx.doi.org/10.2139/ssrn.4067957

Qian He (Contact Author)

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Hong Kong

Sibo Liu

Hong Kong Baptist University ( email )

Renfrew Road 34
Kowloon Tong
Hong Kong

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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