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Investment and union certification

  • Bruce C. Fallick
  • Kevin A. Hassett

A growing body of work--both theoretical and empirical--has emphasized that unionization may be better understood as a tax on capital rather than a tax on labor. Under this "new" view, unionization unambiguously lowers investment. Using data on union certification elections, we estimate the impact of unionization on firms' investment behavior. Employing both a standard q-model and an "investment surprises" technique, we find that union certification significantly reduces investment. We find that a winning certification election has, on average, about the same effect on investment as would a 30 percentage point increase in the corporate tax.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 96-43.

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Date of creation: 1996
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Handle: RePEc:fip:fedgfe:96-43
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  1. Voos, Paula B & Mishel, Lawrence R, 1986. "The Union Impact on Profits in the Supermarket Industry," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 513-17, August.
  2. Connolly, Robert A & Hirsch, Barry T & Hirschey, Mark, 1986. "Union Rent Seeking, Intangible Capital, and Market Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 567-77, November.
  3. Barry T. Hirsch & Robert A. Connolly, 1987. "Do Unions Capture Monopoly Profits?," ILR Review, Cornell University, ILR School, vol. 41(1), pages 118-136, October.
  4. Denny, K. & Nickell, S., 1990. "Unions And Investment In British Industry," Economics Series Working Papers 9992, University of Oxford, Department of Economics.
  5. Machin, Stephen J & Wadhwani, Sushil, 1991. "The Effects of Unions on Organisational Change and Employment," Economic Journal, Royal Economic Society, vol. 101(407), pages 835-54, July.
  6. Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January.
  7. Fallick, B.C. & Hassett,K., 1990. "Unionization And Acquisitions," Papers 31, California Los Angeles - Applied Econometrics.
  8. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-78, December.
  9. Voos, Paula B & Mishel, Lawrence R, 1986. "The Union Impact on Profits: Evidence from Industry Price-Cost Margin Data," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 105-33, January.
  10. Michael A. Salinger, 1984. "Tobin's q, Unionization, and the Concentration-Profits Relationship," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 159-170, Summer.
  11. Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1994. "A Reconsideration of Investment Behavior Using Tax Reforms as Natural Experiments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 1-74.
  12. Bronars, Stephen G & Deere, Donald R, 1993. "Union Organizing Activity, Firm Growth, and the Business Cycle," American Economic Review, American Economic Association, vol. 83(1), pages 203-20, March.
  13. Harry G. Johnson & Peter Mieszkowski, 1970. "The Effects of Unionization on the Distribution of Income: A General Equilibrium Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 84(4), pages 539-561.
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