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Labor Policy and Investment: Evidence from Canada

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  • John W. Budd
  • Yijiang Wang

Abstract

Some critics of proposed legislative labor policy changes contend that laws favoring labor would adversely affect business investment. Research on labor policy, however, often assumes that investment is fixed. The authors present a sequential bargaining model in which labor policies that increase labor's bargaining power and reduce management's options during strikes are predicted to reduce investment. The results of an analysis of provincial data on investment for 1967 to 1999 indicate that strike replacement bans and protections for workers who refuse to handle struck work did indeed reduce new investment, especially within the first few years after the policy change. Particularly sensitive was building construction investment, which declined by about as much when a labor policy benefiting labor was enacted as it would be expected to decline in a recession.

Suggested Citation

  • John W. Budd & Yijiang Wang, 2004. "Labor Policy and Investment: Evidence from Canada," ILR Review, Cornell University, ILR School, vol. 57(3), pages 386-401, April.
    • Handle: RePEc:sae:ilrrev:v:57:y:2004:i:3:p:386-401
    DOI: 10.1177/001979390405700304
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    Cited by:

    1. Michele Campolieti & Robert Hebdon & Benjamin Dachis, 2014. "The Impact of Collective Bargaining Legislation on Strike Activity and Wage Settlements," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(3), pages 394-429, July.
    2. Paul Duffy & Susan Johnson, 2009. "The Impact of Anti-Temporary Replacement Legislation on Work Stoppages: Empirical Evidence from Canada," Canadian Public Policy, University of Toronto Press, vol. 35(1), pages 99-120, March.

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