Abstract
Much research has focused on the direct effect of unions on production efficiency given set technology and plant scale. However, another path through which unions may influence productivity has received virtually no attention: the indirect productivity effect that unions may exert on the firm’s choice of plant size. We present a model in which firms explicitly consider the positive correlation between the probability of being unionized and plant scale in choosing plant scale and show that unions may prevent firms from fully exploiting economies of scale by their threat of organizing. Although it may be difficult to directly estimate this effect, there is ample casual empirical support that union status and plant scale are positively related.
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Milkman, M., Mitchell, M. Union influence on plant size. Journal of Labor Research 16, 319–329 (1995). https://doi.org/10.1007/BF02685760
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DOI: https://doi.org/10.1007/BF02685760