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Labour 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. Copyright 2008, Wiley-Blackwell.

Suggested Citation

  • Alexandre Mas, 2008. "Labour Unrest and the Quality of Production: Evidence from the Construction Equipment Resale Market," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 229-258.
  • Handle: RePEc:oup:restud:v:75:y:2008:i:1:p:229-258
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2007.00461.x
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    Cited by:

    1. Steinar Holden, 2012. "Implications of insights from behavioral economics for macroeconomic models," IMK Working Paper 99-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Gary-Bobo, Robert J. & Jaaidane, Touria, 2014. "Strikes and slowdown in a theory of relational contracts," European Journal of Political Economy, Elsevier, vol. 36(C), pages 89-116.
    3. Jonathan Gruber & Samuel A. Kleiner, 2012. "Do Strikes Kill? Evidence from New York State," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 127-157, February.
    4. Stefan Bauernschuster & Timo Hener & Helmut Rainer, 2015. "When Labor Disputes Bring Cities to a Standstill: The Impact of Public Transit Strikes on Traffic, Accidents, Air Pollution, and Health," CESifo Working Paper Series 5313, CESifo Group Munich.
    5. Kirsten Thommes & Agnes Akkerman & René Torenvlied & Marieke Born, 2014. "The dark side of solidarity: social norms and social relations in the aftermath of strikes," Industrial Relations Journal, Wiley Blackwell, vol. 45(4), pages 348-367, July.
    6. Thommes, Kirsten & Vyrastekova, Jana & Akkerman, Agnes, 2015. "Behavioral spillovers from freeriding in multilevel interactions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 56(C), pages 78-87.
    7. repec:ucp:jpolec:doi:10.1086/693137 is not listed on IDEAS
    8. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    9. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    10. Driscoll, John C. & Holden, Steinar, 2014. "Behavioral economics and macroeconomic models," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 133-147.
    11. Stefan Bauernschuster & Timo Hener & Helmut Rainer, 2017. "When Labor Disputes Bring Cities to a Standstill: The Impact of Public Transit Strikes on Traffic, Accidents, Air Pollution, and Health," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 1-37, February.
    12. 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.
    13. Panos, Georgios & Theodossiou, Ioannis, 2009. "Union Mediation and Adaptation to Reciprocal Loyalty Arrangements," MPRA Paper 15471, University Library of Munich, Germany.
    14. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    15. Michael S. Dahl, 2011. "Organizational Change and Employee Stress," Management Science, INFORMS, vol. 57(2), pages 240-256, February.
    16. Shonchoy, Abu S. & Tsubota, Kenmei, 2015. "Economic impact of political protests (strikes) on manufacturing firms : evidence from Bangladesh," IDE Discussion Papers 523, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    17. Kareem Haggag & Brian McManus & Giovanni Paci, 2017. "Learning by Driving: Productivity Improvements by New York City Taxi Drivers," American Economic Journal: Applied Economics, American Economic Association, vol. 9(1), pages 70-95, January.
    18. 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, vol. 13(1), pages 21-35, March.
    19. Alexandre Mas, 2017. "Does Transparency Lead to Pay Compression?," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1683-1721.
    20. Mariesa A. Herrmann & Jonah E. Rockoff, 2012. "Worker Absence and Productivity: Evidence from Teaching," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 749-782.

    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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