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Unions and Economic Performance in Developing Countries: Case Studies from Latin America

  • Fernando Rios-Avila
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    This paper analyzes the economic impact of unions on productivity in the manufacturing sector across six Latin American countries: Argentina, Bolivia, Chile, Mexico, Panama, and Uruguay. Using an augmented Cobb-Douglas production function, the paper finds that unions have positive, but mostly small, effects on productivity, with the exception of Argentina, with a large negative effect, and Bolivia, with no effect. An analysis on profitability shows that, in most cases, the positive productivity effects barely offset higher union compensation, and that unions are negatively related to investment in capital and R and D. Different explanations for these effects are discussed.

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    File URL: http://www.levyinstitute.org/pubs/wp_787.pdf
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    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_787.

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    Date of creation: Jan 2014
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    Handle: RePEc:lev:wrkpap:wp_787
    Contact details of provider: Web page: http://www.levyinstitute.org

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    1. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496 National Bureau of Economic Research, Inc.
    2. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May.
    3. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
    4. Machin, Stephen & Wadhwani, Sushil, 1991. "The Effects of Unions of Investment and Innovation: Evidence from WIRS," Economic Journal, Royal Economic Society, vol. 101(405), pages 324-30, March.
    5. Patrice Laroche & Hristos Doucouliagos, 2009. "Unions and Profits: A meta-regression Analysis," Post-Print hal-00648569, HAL.
    6. Morris M. Kleiner & Jonathan S. Leonard & Adam M. Pilarski, 2002. "How industrial relations affects plant performance: The case of commercial aircraft manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(2), pages 195-218, January.
    7. Barry T. Hirsch & Robert A. Connolly, 1987. "Do unions capture monopoly profits?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(1), pages 118-136, October.
    8. Rios-Avila, Fernando & Hirsch, Barry, 2012. "Unions, Wage Gaps, and Wage Dispersion: New Evidence from the Americas," IZA Discussion Papers 6757, Institute for the Study of Labor (IZA).
    9. Hirsch, Barry, 2003. "What Do Unions Do for Economic Performance?," IZA Discussion Papers 892, Institute for the Study of Labor (IZA).
    10. 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.
    11. 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.
    12. Bruce E. Kaufman, 2004. "What Unions Do: Insights from Economic Theory," Journal of Labor Research, Transaction Publishers, vol. 25(3), pages 351-382, July.
    13. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    14. Toke Aidt & Zafiris Tzannatos, 2002. "Unions and Collective Bargaining : Economic Effects in a Global Environment," World Bank Publications, The World Bank, number 15241.
    15. Allen, Steven G, 1984. "Unionized Construction Workers Are More Productive," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 251-74, May.
    16. Evangelos M. Falaris, 2008. "A Quantile Regression Analysis of Wages in Panama," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 498-514, 08.
    17. Laroche, P., 2000. "What do Unions do to Productivity? A Meta-Analysis," Papers 2000-5, Groupe de recherche en économie financière et en gestion des entreprises, Universite Nancy 2.
    18. Chris Doucouliagos & Patrice Laroche, 2007. "Unions and Profitability: A Meta-Analysis," Economics Series 2007_01, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
    19. Wessels, Walter J, 1994. "Do Unionized Firms Hire Better Workers?," Economic Inquiry, Western Economic Association International, vol. 32(4), pages 616-29, October.
    20. David Fairris, 2006. "Union Voice Effects in Mexico," British Journal of Industrial Relations, London School of Economics, vol. 44(4), pages 781-800, December.
    21. John DiNardo & David S. Lee, 2004. "Economic Impacts of New Unionization On Private Sector Employers: 1984-2001," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1383-1441, November.
    22. Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September.
    23. Hirsch, Barry, 2007. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," IZA Discussion Papers 2930, Institute for the Study of Labor (IZA).
    24. Lucas Ronconi, 2012. "Globalization, Domestic Institutions, and Enforcement of Labor Law: Evidence from Latin America," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(1), pages 89-105, 01.
    25. David Fairris, 2003. "Unions and wage inequality in Mexico," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(3), pages 481-497, April.
    26. 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.
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