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

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  • Alexandre Mas

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

  • Alexandre Mas, 2007. "Labor Unrest and the Quality of Production: Evidence from the Construction Equipment Resale Market," NBER Working Papers 13138, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13138
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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D2 - Microeconomics - - Production and Organizations
    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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