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Unionisation, short-run flexibility and cost efficiency: Evidence from U.S. manufacturing

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Author Info

  • Elisabetta Magnani

    (The University of New South Wales)

  • David Prentice

    ()
    (Department of Economics and Finance, La Trobe University)

Abstract

Flexibility is of great interest to policy makers and in the popular policy debate, unions are believed to be a main impediment to achieving it. However, these beliefs are not based on firm empirical foundations. Using a new dataset on U.S. three digit manufacturing industries from 1971 - 1994, we quantify, for the first time, Stigler's concept of output flexibility, estimate input flexibility and quantify the effects of unionisation on both. We find that on average unionisation reduces input flexibility by about 50%, raises average costs by about 3% but reduces output flexibility by just 0.35%.

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File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0008/130859/2000.04.pdf
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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2000.04.

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Length: 38 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:ltr:wpaper:2000.04

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Web page: http://www.latrobe.edu.au/economics
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Keywords: Labour Market; Workers Representation; Costs EDIRC Provider-Institution: RePEc:edi:smlatau;

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References

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  1. Freeman, Richard B & Medoff, James L, 1982. "Substitution between Production Labor and Other Inputs in Unionized and Nonunionized Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 220-33, May.
  2. Randall W. Eberts & Joe A. Stone, 1987. "Unionization and cost of production: compensation, productivity, and factor-use effects," Working Paper 8701, Federal Reserve Bank of Cleveland.
  3. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  4. Mayshar, Joram & Halevy, Yoram, 1997. "Shiftwork," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S198-222, January.
  5. Hoxby, Caroline Minter, 1996. "How Teachers' Unions Affect Education Production," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 671-718, August.
  6. Daniel S. Hamermesh & Stephen J. Trejo, 1997. "The Demand for Hours of Labor: Direct Evidence from California," NBER Working Papers 5973, National Bureau of Economic Research, Inc.
  7. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
  8. George Stigler, 1939. "Production and Distribution in the Short Run," Journal of Political Economy, University of Chicago Press, vol. 47, pages 305.
  9. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521464673, October.
  10. Robert A. Jones & Joseph M. Ostroy, 1979. "Flexibilty and Uncertainty," UCLA Economics Working Papers 163, UCLA Department of Economics.
  11. Timothy F. Bresnahan & Valerie A. Ramey, 1992. "Output Fluctuations at the Plant Level," NBER Working Papers 4105, National Bureau of Economic Research, Inc.
  12. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
  13. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June.
  14. John M. Abowd & Henry S. Farber, 1990. "Product Market Competition, Union Organizing Activity, and Employer Resistence," NBER Working Papers 3353, National Bureau of Economic Research, Inc.
  15. Mills, David E, 1984. "Demand Fluctuations and Endogenous Firm Flexibility," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 55-71, September.
  16. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  17. Earle, John S & Pencavel, John, 1990. "Hours of Work and Trade Unionism," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S150-74, January.
  18. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October.
  19. Trejo, Stephen J, 1993. "Overtime Pay, Overtime Hours, and Labor Unions," Journal of Labor Economics, University of Chicago Press, vol. 11(2), pages 253-78, April.
  20. Hiebert, L Dean, 1989. "Cost Flexibility and Price Dispersion," Journal of Industrial Economics, Wiley Blackwell, vol. 38(1), pages 103-09, September.
  21. Edward C. Kokkelenberg & Donna R. Sockell, 1985. "Union membership in the United States, 1973รป1981," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(4), pages 497-543, July.
  22. Richard B. Freeman & James L. Medoff, 1979. "New estimates of private sector unionism in the United States," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 32(2), pages 143-174, January.
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