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Do unions make enterprises insolvent?

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Author Info

  • Richard B. Freeman
  • Morris M. Kleiner

Abstract

This study investigates the impact of unionization on closures of firms, business lines, and establishments. Analyzing data from two major data sets-one (from the COMPUSTAT files) on the union status of solvent and insolvent enterprises and business lines, and one (obtained by matching files from the Current Population Survey) on the union status of workers who have lost their jobs due to permanent plant closures or business failures-the authors find little support for the hypothesis that unionization increases the insolvency of firms. The results are consistent with the hypothesis that unions behave in an economically rational manner, pushing wages to the point where union firms may expand less rapidly than nonunion firms, but not to the point where the firm, plant, or business line closes down. (Abstract courtesy JSTOR.)

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 52 (1999)
Issue (Month): 4 (July)
Pages: 510-527

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Handle: RePEc:ilr:articl:v:52:y:1999:i:4:p:510-527

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References

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  1. Ruback, Richard S & Zimmerman, Martin B, 1984. "Unionization and Profitability: Evidence from the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1134-57, December.
  2. Barry T. Hirsch & Robert A. Connolly, 1987. "Do unions capture monopoly profits?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(1), pages 118-136, October.
  3. Richard B. Freeman & Edward P. Lazear, 1994. "An Economic Analysis of Works Councils," NBER Working Papers 4918, National Bureau of Economic Research, Inc.
  4. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1986. "The Intertemporal Stability of the Concentration-Margins Relationship," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 13-34, September.
  5. Pencavel, John H, 1984. "The Tradeoff between Wages and Employment in Trade Union Objectives," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 215-31, May.
  6. Macpherson, D.A. & Dunne, T., 1992. "Unionism and Gross Employment Flows," Working Papers 1992_10_5, Department of Economics, Florida State University.
  7. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
  8. Karier, Thomas M, 1985. "Unions and Monopoly Profits," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 34-42, February.
  9. Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.
  10. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  11. Richard B. Freeman, 1983. "Unionism, Price-Cost Margins, and the Return to Capital," NBER Working Papers 1164, National Bureau of Economic Research, Inc.
  12. Connolly, Robert A & Hirsch, Barry T & Hirschey, Mark, 1986. "Union Rent Seeking, Intangible Capital, and Market Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 567-77, November.
  13. Kleiner, Morris M., 1984. "Public policy implications of financial information requirements under the national labor relations act," Journal of Accounting and Public Policy, Elsevier, vol. 3(4), pages 253-257.
  14. Michael A. Salinger, 1984. "Tobin's q, Unionization, and the Concentration-Profits Relationship," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 159-170, Summer.
  15. Voos, Paula B & Mishel, Lawrence R, 1986. "The Union Impact on Profits: Evidence from Industry Price-Cost Margin Data," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 105-33, January.
  16. Kuhn, Peter, 1986. "Wages, Effort, and Incentive Compatibility in Life-Cycle Employment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 28-49, January.
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Citations

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Cited by:
  1. David Metcalf, 2002. "Unions and productivity, financial performance and investment: international evidence," LSE Research Online Documents on Economics 20072, London School of Economics and Political Science, LSE Library.
  2. Gabriel Burdin, 2012. "Does workers’ control affect firm survival? Evidence from Uruguay," Documentos de Trabajo (working papers) 12-06, Instituto de Economia - IECON.
  3. Michael Kremer & Benjamin A. Olken, 2009. "A Biological Model of Unions," American Economic Journal: Applied Economics, American Economic Association, vol. 1(2), pages 150-75, April.
  4. Edgar Preugschat, 2009. "Unionization Patterns and Firm Reallocation," 2009 Meeting Papers 1114, Society for Economic Dynamics.
  5. Barry T. Hirsch & Edward J. Schumacher, 2001. "Private Sector Union Density and the Wage Premium: Past, Present, and Future ," Journal of Labor Research, Transaction Publishers, vol. 22(3), pages 487-518, July.
  6. Addison, John T. & Heywood, John S. & Wei, Xiangdong, 2001. "Unions and Plant Closings in Britain: New Evidence from the 1990/98 WERS," IZA Discussion Papers 352, Institute for the Study of Labor (IZA).
  7. John DiNardo & David S. Lee, 2002. "The Impact of Unionization on Establishment Closure: A Regression Discontinuity Analysis of Representation Elections," NBER Working Papers 8993, National Bureau of Economic Research, Inc.
  8. Steinbacher, Matej & Steinbacher, Matjaz & Steinbacher, Mitja, 2009. "To Work or Not? Simulating Inspection Game with Labor Unions," MPRA Paper 13565, University Library of Munich, Germany.
  9. Alex Bryson & Michael White, 2006. "Unions, Within-Workplace Job Cuts and Job Security Guarantees," CEP Discussion Papers dp0733, Centre for Economic Performance, LSE.
  10. Gabriel Burdin, 2014. "Are Worker-Managed Firms More Likely to Fail than Conventional Enterprises? Evidence from Uruguay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 67(1), pages 202-238, January.
  11. Burdín, Gabriel, 2013. "Are Worker-Managed Firms Really More Likely to Fail?," IZA Discussion Papers 7412, Institute for the Study of Labor (IZA).
  12. David G. Blanchflower & Alex Bryson, 2003. "What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?," NBER Working Papers 9973, National Bureau of Economic Research, Inc.
  13. Aaron J. Sojourner & Robert J. Town & David C. Grabowski & Michelle M. Chen, 2012. "Impacts of Unionization on Employment, Product Quality and Productivity: Regression Discontinuity Evidence From Nursing Homes," NBER Working Papers 17733, National Bureau of Economic Research, Inc.

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