Mergers and Unionization: Roll Together or Clash?

Abstract

This paper explores the interplay between mergers and unionism and disentangles their product market impacts by analyzing concurrent merger and unionization episodes in the U.S. airline industry. We find that unionization alone reduces service quality and increases airfare, while a concurrent merger mitigates these effects and lowers fares. The interaction effects between the two events are non-monotonic and time-varying and may improve consumer surplus in the long run. Our conceptual framework accounts for the lengthy merger process and provides a potential explanation. Our findings present a novel perspective on reconciling previous merger studies and offer important policy implications.

Keywords: merger, labor union, product market, quality, price