Skip to main content
SpringerLink
Log in

The impact of unionization on the entry of firms: Evidence from U.S. industries

  • Articles
  • Published:
Journal of Labor Research Aims and scope Submit manuscript

Abstract

Traditional models of entry-deterrence typically emphasize sunk costs or predatory pricing, but unionization might also discourage potential entrants. This paper explores this possibility through an empirical model of entry that includes unionization as an explanatory variable. We find that unionization has a statistically significant entry-deterring effect.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acs, Z.J., and D.B. Audretsch.Innovation and Small Firms. Cambridge: MIT Press, 1990.

    Google Scholar 

  • Baumol, W.J., and R.D. Willig. “Fixed Cost, Sunk Cost, Entry Barriers, and Sustainability of Monopoly.”Quarterly Journal of Economics 95 (August 1981): 405–31.

    Article  Google Scholar 

  • Carter, J.R. “Collusion, Efficiency, and Antitrust.”Journal of Law and Economics 21 (October 1978): 435–44.

    Article  Google Scholar 

  • Caves, R.E., and T.A. Pugel.Intraindustry Differences in Conduct and Performance: Variable Strategies in U.S. Manufacturing Industries. New York: New York University Press, 1980.

    Google Scholar 

  • Chappell, W.F., M.S. Kimenyi, and W.J. Mayer. “A Poisson Probability Model of Entry and Market Structure with an Application to U.S. Industries During 1972–77.”Southern Economic Journal 56 (April 1990): 918–27.

    Article  Google Scholar 

  • Chappell, W.F., W.J. Mayer, and W.F. Shughart. “Union Rents and Market Structure Revisited.”Journal of Labor Research 12 (Winter 1991): 35–46.

    Article  Google Scholar 

  • Chappell, W.F., and R.L. Cottle. “Sources of Concentration-Related Profits.”Southern Economic Journal 51 (April 1985): 1031–37.

    Article  Google Scholar 

  • Clark, K.B. “Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity.”American Economic Review 74 (December 1984): 893–919.

    Google Scholar 

  • Dewartripont, M. “Entry Deterrence under Trade Unions.”European Economic Review 31 (February/March 1987): 149–56.

    Article  Google Scholar 

  • _____ “Commitment through Renegotiation-Proof Contracts with Third Parties.”Review of Economic Studies 55 (July 1988): 377–89.

    Article  Google Scholar 

  • Domowitz, I., R.G. Hubbard, and B.C. Peterson. “The Intertemporal Stability of Concentration-Margins Relationship.”Journal of Industrial Economics 35 (September 1986): 13–34.

    Article  Google Scholar 

  • Duetsch, L.L. “Structure, Performance, and the Net Rate of Entry into Manufacturing Industry.”Southern Economic Journal 41 (January 1975): 450–56.

    Article  Google Scholar 

  • _____ “Entry and the Extent of Multiplant Operations.”Journal of Industrial Economics 32 (June 1984): 477–87.

    Article  Google Scholar 

  • Dunne, T., M.J. Roberts, and L. Samuelson. “Patterns of Firm Entry and Exit in U.S. Manufacturing Industries.”Rand Journal of Economics 19 (Winter 1988): 495–515.

    Article  Google Scholar 

  • Dunne, T., and D.A. Macpherson. “Unionism and Gross Employment Flows.” Working paper, 1991.

  • Flanagan, R.J. “Wage Interdependence in Unionized Labor Markets.”Brookings Papers on Economic Activity 3 (1976): 653–73.

    Google Scholar 

  • Freeman, R.B., and J.L. Medoff. “New Estimates of Private Sector Unionism in the United States.”Industrial and Labor Relations Review 32-2 (January 1979): 143–74.

    Article  Google Scholar 

  • Gorecki, P.K. “The Determinants of Entry by New and Diversifying Enterprises in the U.K. Manufacturing Sector 1958–1963: Some Tentative Results.”Applied Economics 7 (June 1975): 139–47.

    Article  Google Scholar 

  • _____ “The Determinants of Entry by Domestic and Foreign Enterprises in Canadian Manufacturing Industries: Some Comments and Empirical Results.”Review of Economics and Statistics 58 (November 1976): 485–88.

    Article  Google Scholar 

  • Hirsch, B.T. “Market Structure, Union Rent Seeking, and Firm Profitability.”Economics Letters 32 (1990): 75–79.

    Article  Google Scholar 

  • _____ and R.A. Connolly. “Do Unions Capture Monopoly Profits?”Industrial and Labor Relations Review 41 (October 1987): 118–36.

    Article  Google Scholar 

  • Hundley, Greg. “The Threat of Unionization and Wage-Coverage Effects.”Journal of Labor Research 8 (Summer 1987): 237–51.

    Article  Google Scholar 

  • Karier, T. “Unions and Monopoly Profits.”Review of Economics and Statistics 67 (February 1985): 34–42.

    Article  Google Scholar 

  • Kessides, I. “Advertising, Sunk Costs, and Barriers to Entry.”Review of Economics and Statistics 68 (February 1986): 84–95.

    Article  Google Scholar 

  • _____ “Towards a Testable Model of Entry: A Study of U.S. Manufacturing Industries.”Economica 57 (May 1990): 219–38.

    Article  Google Scholar 

  • MacDonald, J.M. “Entry and Exit on the Competitive Fringe.”Southern Economic Journal 52 (January 1986): 640–52.

    Article  Google Scholar 

  • Maloney, M.T., R.E. McCormick, and R.D. Tollison. “Achieving Cartel Profits through Unionization.”Southern Economic Journal 46 (October 1979): 628–34.

    Article  Google Scholar 

  • Martin, S., and C. Rence. “Vertical Spillovers, Market Concentration, Union Coverage, and Wages.”Journal of Labor Research 5 (Spring 1984): 177–89.

    Article  Google Scholar 

  • Masson, R.T., and J. Shaanan. “Stochastic-Dynamic Limit Pricing: An Empirical Test.”Review of Economics and Statistics 64 (August 1982): 413–22.

    Article  Google Scholar 

  • Mills, D.E. “Demand Fluctuations and Endogenous Firm Flexibility.”Journal of Industrial Economics 33 (September 1984): 55–71.

    Article  Google Scholar 

  • _____ and L. Schumann. “Industry Structure with Fluctuating Demand.”American Economic Review 75 (September 1985): 758–767.

    Google Scholar 

  • Moore, W.J., R.J. Newman, and J. Cunningham.“The Effect of the Extent of Unionization on Union and Nonunion Wages.”Journal of Labor Research 6 (Winter 1985): 21–44.

    Article  Google Scholar 

  • Rosen, S. “Trade Union Power, Threat Effects and the Extent of Unionization.”Review of Economics Studies 36 (April 1969): 185–96.

    Article  Google Scholar 

  • Salinger, M. “Tobin’s q, Unionization, and the Concentration-Profits Relationship.”Rand Journal of Economics 15 (Summer 1984): 159–70.

    Article  Google Scholar 

  • Salop, S.C., and D.T. Scheffman. “Raising Rivals’ Costs.”American Economic Review 73 (May 1983): 267–71.

    Google Scholar 

  • _____. “Cost-raising Strategies.”Journal of Industrial Economics 36 (September 1987): 19–34.

    Article  Google Scholar 

  • Schmalensee, R. “Inter-Industry Studies of Structure and Performance.” InHandbook of Industrial Organization, Vol. 2. Edited by R. Schmalensee and R.D. Willig. Amsterdam: North-Holland, 1989.

    Google Scholar 

  • Stigler, G.J.Capital and Rate of Return in Manufacturing Industries. Princeton, N.J.: Princeton University Press, 1963.

    Google Scholar 

  • Vroman, S. “The Direction of Wage Spillovers in Manufacturing.”Industrial and Labor Relations Review 36 (October 1982): 102–12.

    Article  Google Scholar 

  • Williamson, O.E. “Wage Rates as a Barrier to Entry: The Pennington Case in Perspective.”Quarterly Journal of Economics 82 (February 1968): 85–116.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Mississippi, 38677, University, MS

    William F. Chappell & Walter J. Mayer

  2. The University of Connecticut, 06269, Storrs, CT

    Mwangi S. Kimenyi

Authors
  1. William F. Chappell
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mwangi S. Kimenyi
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Walter J. Mayer
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Chappell, W.F., Kimenyi, M.S. & Mayer, W.J. The impact of unionization on the entry of firms: Evidence from U.S. industries. Journal of Labor Research 13, 273–283 (1992). https://doi.org/10.1007/BF02685485

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02685485

Keywords

Search

Navigation