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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.

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Paper provided by Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) in its series Working Papers with number 0502.

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Handle: RePEc:hrr:papers:0502
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  1. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect of Collective Bargaining Legislation on Strikes and Wages," Papers of Peter Cramton 99res, University of Maryland, Department of Economics - Peter Cramton, revised 30 Jul 1998.
  2. Fallick, Bruce C & Hassett, Kevin A, 1999. "Investment and Union Certification," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 570-82, July.
  3. 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 779-94, November.
  4. 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 155-85, April.
  5. Denny, K. & Nickell, S., 1990. "Unions And Investment In British Industry," Economics Series Working Papers 9992, University of Oxford, Department of Economics.
  6. 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.
  7. Henry C. Simons, 1944. "Some Reflections on Syndicalism," Journal of Political Economy, University of Chicago Press, vol. 52, pages 1.
  8. Budd, J.W., 1993. "Canadian Strike Replacement Legislation and Collective Bargainig : Lessons for United States," Papers 93-08, Minnesota - Industrial Relations Center.
  9. 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.
  10. Budd, J.W., 1995. "The Effect of Strike Replacement Legislation of Employment," Papers 95-04, Minnesota - Industrial Relations Center.
  11. Cameron W. Odgers & Julian R. Betts, 1997. "Do unions reduce investment? Evidence from Canada," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(1), pages 18-36, October.
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