Firm Investment Behavior and strongCollectivestrong Bargaining Strategy.PDF

Appeared in Industrial Relations , Vol. 31, No. 1, Winter 1992, pp. 95-121, reprinted in Labor Market Institutions and the Future Role of Unions, edited by Mario F. Bognanno and Morris M. Kleiner, Cambridge, Mass.: Blackwell Publishers, 1992. Firm Investment Behavior and Collective Bargaining Strategy by Barry T. Hirsch Department of Economics Florida State University Tallahassee, Florida 32306 July 1989 First Revision, February 1990 Second Revision, June 1990 Abstract This paper utilizes survey data on labor union coverage at the firm level to examine union-nonunion differences in investment activity among 706 U.S. companies during the 1970s. Consistent with a model of union rent seeking, firm-level collective bargaining is associated with significantly lower physical capital and RD investment, even following extensive control for firm and industry characteristics. Deleterious union effects on investment are sizable throughout the 1972-1980 period, but vary considerably across industries. In the absence of significant changes in collective bargaining power or strategies, diminished investment activity by unionized companies is likely to exacerbate the already considerable decline in U.S. union coverage. Prepared for “The Future Roles of Unions, Industry and Government in Industrial Relations,” Humphrey Institute of Public Affairs, University of Minnesota, April 27, 1990. Financial support from the W.E. Upjohn Institute f