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Labor Policy and Investment


  • John Budd


  • Yijiang Wang



Policy debates over proposed legislative labor policy changes include contentions that business investment will negatively respond to labor laws that favor labor. Research on labor policy, however, often assumes that investment is fixed. We 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. Using provincial data on investment for 1967 to 1999, a strike replacement ban and protections for workers who refuse to handle struck work are estimated to reduce new investment, especially within the first few years after the policy change.

Suggested Citation

  • John Budd & Yijiang Wang, "undated". "Labor Policy and Investment," Working Papers 0502, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  • Handle: RePEc:hrr:papers:0502

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    References listed on IDEAS

    1. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
    2. Fallick, Bruce C & Hassett, Kevin A, 1999. "Investment and Union Certification," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 570-582, July.
    3. Gunderson, Morley & Melino, Angelo, 1990. "The Effects of Public Policy on Strike Duration," Journal of Labor Economics, University of Chicago Press, vol. 8(3), pages 295-316, July.
    4. Budd, John W., 2000. "The effect of strike replacement legislation on employment," Labour Economics, Elsevier, vol. 7(2), pages 225-247, March.
    5. Denny, Kevin & Nickell, Stephen J, 1992. "Unions and Investment in British Industry," Economic Journal, Royal Economic Society, vol. 102(413), pages 874-887, July.
    6. Baldwin, Carliss Y, 1983. "Productivity and Labor Unions: An Application of the Theory of Self-Enforcing Contracts," The Journal of Business, University of Chicago Press, vol. 56(2), pages 155-185, April.
    7. Cameron W. Odgers & Julian R. Betts, 1997. "Do Unions Reduce Investment? Evidence from Canada," ILR Review, Cornell University, ILR School, vol. 51(1), pages 18-36, October.
    8. Budd, J.W., 1993. "Canadian Strike Replacement Legislation and Collective Bargainig : Lessons for United States," Papers 93-08, Minnesota - Industrial Relations Center.
    9. Morley Gunderson & John Kervin & Frank Reid, 1989. "The Effect of Labour Relations Legislation on Strike Incidence," Canadian Journal of Economics, Canadian Economics Association, vol. 22(4), pages 779-794, November.
    10. Kevin Denny & Stephen Nickell, 1991. "Unions and Investment in British Manufacturing Industry," British Journal of Industrial Relations, London School of Economics, vol. 29(1), pages 113-121, March.
    11. Henry C. Simons, 1944. "Some Reflections on Syndicalism," Journal of Political Economy, University of Chicago Press, vol. 52, pages 1-1.
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    Cited by:

    1. Morris M. Kleiner & Hwikwon Ham, 2002. "Do Industrial Relations Institutions Impact Economic Outcomes?: International and U.S. State-Level Evidence," NBER Working Papers 8729, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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