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Labor 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.

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    File URL: http://www.nber.org/papers/w13138.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13138.

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    Date of creation: May 2007
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    Handle: RePEc:nbr:nberwo:13138

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