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Can Union Labor Ever Cost Less?

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Steven G. Allen

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Abstract

This paper examines the effect of unions on efficiency by estimating cost function systems over three different sets of construction projects. The results show that union contractors have greater economies of scale. This gives them a cost advantage in large commercial office buildings, but in school and hospital construction, nonunion contractors have lower costs at all output levels. Despite the cost differences, profits for nonunion contractors in school and hospital construction are no higher than those for union contractors because the burden of higher union costs is shifted to buyers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2019.

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Date of creation: Feb 1988
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Handle: RePEc:nbr:nberwo:2019

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Yotopoulos, Pan A & Lau, Lawrence J, 1973. "A Test for Relative Economic Efficiency: Some Further Results," American Economic Review, American Economic Association, vol. 63(1), pages 214-23, March. [Downloadable!] (restricted)
  2. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought. [Downloadable!]
  3. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-76, August. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Allen, Steven G, 1983. "Much Ado about Davis-Bacon: A Critical Review and New Evidence," Journal of Law & Economics, University of Chicago Press, vol. 26(3), pages 707-36, October.
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  1. Kevin Duncan & Peter Philips & Mark Prus, 2006. "Prevailing wage legislation and public school construction efficiency: a stochastic frontier approach1," Construction Management & Economics, Taylor and Francis Journals, vol. 24(6), pages 625-634, June. [Downloadable!] (restricted)
  2. Daniel P. Kessler & Lawrence Katz, 1999. "Prevailing Wage Laws and Construction Labor Markets," NBER Working Papers 7454, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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