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Can Union Labor Ever Cost Less?

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  • Steven G. Allen

Abstract

This paper examines the effect of unions on efficiency by estimating cost function systems over three different sets of construction projects. The results show that union contractors have greater economies of scale. This gives them a cost advantage in large commercial office buildings, but in school and hospital construction, nonunion contractors have lower costs at all output levels. Despite the cost differences, profits for nonunion contractors in school and hospital construction are no higher than those for union contractors because the burden of higher union costs is shifted to buyers.

Suggested Citation

  • Steven G. Allen, 1986. "Can Union Labor Ever Cost Less?," NBER Working Papers 2019, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2019
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    References listed on IDEAS

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    1. Ruback, Richard S & Zimmerman, Martin B, 1984. "Unionization and Profitability: Evidence from the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1134-1157, December.
    2. Yotopoulos, Pan A & Lau, Lawrence J, 1973. "A Test for Relative Economic Efficiency: Some Further Results," American Economic Review, American Economic Association, vol. 63(1), pages 214-223, March.
    3. Allen, Steven G, 1983. "Much Ado about Davis-Bacon: A Critical Review and New Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 707-736, October.
    4. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters,in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought.
    5. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-676, August.
    6. Stigler, George J., 1983. "The Organization of Industry," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226774329.
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    Cited by:

    1. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.

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