Labor Unrest and the Quality of Production: Evidence from the Construction Equipment Resale Market

50 Pages Posted: 27 Jun 2007 Last revised: 26 Nov 2022

See all articles by Alexandre Mas

Alexandre Mas

Princeton University - Industrial Relations Section

Date Written: May 2007

Abstract

This paper examines the construction equipment resale market to assess whether equipment produced by the world's largest manufacturer of construction machinery, Caterpillar, experienced lower product quality in facilities that underwent contract disputes during the 1990's. Analysis of auction data reveals that resale market participants significantly discounted machines produced in these dispute-affected facilities. Additionally, pieces of equipment produced in facilities undergoing unrest were resold more often, received worse appraisal reports, and had lower list prices. Taken together, the evidence supports the hypothesis that workmanship at dispute-affected facilities declined, and that the resulting impact on the economic quality of the equipment produced was significant. The dispute was associated with at least $400 million in lost service flows due to inferior quality equipment alone.

Suggested Citation

Mas, Alexandre, Labor Unrest and the Quality of Production: Evidence from the Construction Equipment Resale Market (May 2007). NBER Working Paper No. w13138, Available at SSRN: https://ssrn.com/abstract=989949

Alexandre Mas (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States

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