, Volume 33, Issue 4, pp 443-460

Workers, Unions, and Takeovers

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Abstract

How do takeovers affect workers’ wages and job security in the short-run? What role does the labor union play in mitigating these effects? I answer these two questions by analyzing wage and employment outcomes of over 4,000 public firms that were acquired between 1981 and 2002, using establishment-level data from the U.S. Census Bureau. I find that target establishments exhibit a net contraction in wages and employment, relative to comparable establishments after takeovers. Targets’ establishments in more unionized industries experience worse wage and employment outcomes after takeovers. These adverse effects are exacerbated when the establishment is located in a state with Right-to-work laws where unions face a less favorable bargaining environment. These findings indicate that target firms’ employees are negatively affected by takeovers and that their labor unions do not mitigate these negative effects.

Xiaoyang Li, Cheung Kong Graduate School of Business, Beijing, China. Email: xyli@ckgsb.edu.cn. This article is based on various chapters of my Ph.D. dissertation at the University of Michigan. I am indebted to members of my dissertation committee, Jan Svejnar, Amy Dittmar, Charlie Brown, Francine Lafontaine, Amiyatosh Purnanandam, and Uday Rajan for their guidance and support. I also thank seminar participants at the University of Michigan Business Economics Brownbag workshops, the 2010 International Industrial Organization Conference, the 2011 AEA meetings in Denver for helpful comments. The research was conducted when the author was a Special Sworn Status researcher of the U.S. Census Bureau at the Michigan Research Data Center. Any opinions and conclusions expressed herein are those of the author and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. I acknowledge the generous financial support from Ewing Marion Kauffman Foundation. All errors are my own.