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

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  • Alexandre Mas
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    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. Copyright 2008, Wiley-Blackwell.

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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2007.00461.x
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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Review of Economic Studies.

    Volume (Year): 75 (2008)
    Issue (Month): 1 ()
    Pages: 229-258

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    Handle: RePEc:oup:restud:v:75:y:2008:i:1:p:229-258

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    Cited by:
    1. Panos, Georgios A. & Theodossiou, Ioannis, 2010. "Union Mediation and Adaptation to Reciprocal Loyalty Arrangements," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2010-119, Scottish Institute for Research in Economics (SIRE).
    2. Driscoll, John C. & Holden, Steinar, 2014. "Behavioral Economics and Macroeconomic Models," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2014-43, Board of Governors of the Federal Reserve System (U.S.).
    3. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier, Elsevier.
    4. Dohmen, Thomas, 2014. "Behavioural Labour Economics: Advances and Future Directions," IZA Discussion Papers 8263, Institute for the Study of Labor (IZA).
    5. Steinar Holden, 2012. "Implications of insights from behavioral economics for macroeconomic models," Working Paper, Norges Bank 2012/12, Norges Bank.
    6. Nicola Lacetera & Justin R. Sydnor, 2012. "Would You Buy a Honda Made in the U.S.? The Impact of Production Location on Manufacturing Quality," NBER Working Papers 18005, National Bureau of Economic Research, Inc.
    7. Jonathan Gruber & Samuel A. Kleiner, 2010. "Do Strikes Kill? Evidence from New York State," NBER Working Papers 15855, National Bureau of Economic Research, Inc.
    8. Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
    9. Kirsten Bregn, 2013. "Detrimental Effects of Performance-Related Pay in the Public Sector? On the Need for a Broader Theoretical Perspective," Public Organization Review, Springer, Springer, vol. 13(1), pages 21-35, March.

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