Skip to main content

The effect of unions on labor markets and economic growth: An analysis of state data

Journal of Labor Research volume 22, pages 195–205 (2001)Cite this article

Abstract

Despite voluminous research on unions, there still is no consensus on how unions affect a state's economy. Using a panel of 48 U.S. states for the 1978–1994 period, we estimate a series of simultaneous equations to analyze how unions affect various economic barometers. This provides measures for the partial correlations between unions and performance. The model is then re-estimated using regional dummies to capture fixed effects and to highlight regional differences in the slope of the Phillips curve. We find that unions adversely affect unemployment rates and the growth rates of gross state product (GSP), productivity, and population, while increasing the rate of wage inflation. The impact on the employment growth rate is negative but not significant. A test for fixed effects reveals regional differences in GSP growth. Regional differences in popu-lation growth are not significant. Also, the slope of the Phillips curve is significantly dif-ferent across regions.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

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

References

  • Abowd, John M. and Henry S. Farber. “Product Market Competition, Union Organizing Activity, and Employer Resistance. NBER Working Paper NO. 3353, May 1990.

  • Addison, John T. and Barry T. Hirsch. “Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived? Journal of Ltibor Economics 7 (January 1989): 72–105.

    Article  Google Scholar 

  • Bartik, Timothy J. Who Benefits from Stale and Local Economic Development Policies? Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1991.

    Google Scholar 

  • Belman, Dale. “Unions, and the Quality of Labor Relations, and Firm Performance. In Lawrence Mishel and Paula B. Voos, eds. Unions and Economic Competitiveness. Armonk, N.Y.: M.E. Sharpe, 1992, pp. 41–107.

    Google Scholar 

  • Brown, James N. and Orley Ashenfelter. “Testing the Efficiency of Employment Contracts. Journal of Political Economy 94 (June 1986): S40-S87.

    Article  Google Scholar 

  • Eberts, Richard W. and James A. Stone. Wage and Employment Adjustment in Local Labor Markets. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1992.

    Google Scholar 

  • —. “On the Contract Curve: A Test of Alternative Models of Collective Bargaining. Journal of Labor Economics 4 (January 1986): 66–81.

    Article  Google Scholar 

  • Freeman, Richard B. and James L. Medoff. What Do Unions Do? New York: Basic Books, 1984.

    Google Scholar 

  • Hirsch, Barry T. Labor Unions and the Economic Performance of Firms. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1991.

    Google Scholar 

  • —. “Unionization and Economic Performance: Evidence on Productivity, Profits, Investment, and Growth. In Fazil Mihlar, ed. Unions and Right-to-Work Laws. Vancouver: Fraser Institute, 1997.

    Google Scholar 

  • — and David A. Macpherson. “Union Membership and Coverage Files from the Current Population Surveys: Note. Industrial and Labor Relations Review 46 (April 1993): 574–78.

    Article  Google Scholar 

  • Holmes, Thomas J. “The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders. Journal of Political Economy 106 (August 1998): 667–705.

    Article  Google Scholar 

  • Houseman, Susan and Katharine G. Abraham. “Regional Labor Market Response to Demand Shocks: A Comparison of the United States and West Germany. Presented at the Association for Public Policy Analysis and Management: San Francisco, October 1990.

  • Hsiao, Cheng. Analysis of Panel Data. Cambridge, England: Cambridge University Press, 1986.

    Google Scholar 

  • Hyclak, Thomas and Geraint Johnes. Wage Flexibility and Unemployment Dynamics in Regional Labor Markets. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1992.

    Google Scholar 

  • Kahley, William J. “Population Migration in the United States: A Surrey of Research. Economic Review, Federal Reserve Bank of Atlanta 76 (January/February 1991): 12–21.

    Google Scholar 

  • Karras, Georgios and Leonie Stone. “Determinants of the Natural Rate and Persistence of Unemployment: Evidence for a Panel of U.S. States. Unpublished monograph, University of Illinois at Chicago, 1993.

  • Katz, Lawrence. “Efficiency Wage Theories: A Partial Evaluation. In S. Fischer, ed. NBER Macroeconomics Annual 1986. Cambridge, Mass.: NBER, 1986.

    Google Scholar 

  • Layard, Richard, Stephen Nickell and Richard Jackman. Unemployment, Macroeconomic Performance and the Labour Market. Oxford, England: Oxford University Press, 1991.

    Google Scholar 

  • Lindbeck, Assar and Dennis. J. Snower. The Insider-Outsider Theory of Employment, Interest and Money. Cambridge: MIT Press, 1988.

    Google Scholar 

  • Linneman, Peter, Michael Wachter, and William Carter. “Evaluating the Evidence on Union Employment and Wages. Industrial and Labor Relations Review 44 (October 1990): 34–53.

    Article  Google Scholar 

  • MaCurdy, Thomas E. and John H. Pencavel. “Testing Between Competing Models of Wage and Employment Determination in Unionized Markets. Journal of Political Economy 94 (June 1986): S3-S39.

    Article  Google Scholar 

  • Maki, Dennis R. “The Effects of Unions and Strikes in the Rate of Growth of Total Factor Productivity in Canada. Applied Economics 15 (February 1983): 29–41.

    Article  Google Scholar 

  • Mofidi, Alaeddin and Joe A. Stone. “Do State and Local Taxes Affect Economic Growth? Review of Economics and Statistics 72 (November 1990): 686–91.

    Article  Google Scholar 

  • Northrup, Hebert R. “The Dunlop Commission Report: Philosophy and Overview. Journal of Labor Research 17 (Winter 1996): 1–8.

    Google Scholar 

  • Okun, Arthur M. “Potential GNP: Its Measurement and Significance. Proceedings of the Business and Economic Statistics Section of the American Statistical Association. Washington, D.C.: 1962, 98-103. Reprinted in Pechman, J.A., ed. Economics for Policy Making: Selected Essays of Authur M. Okun. Cambridge, Mass.:MIT Press, 1983.

  • Pantuosco, Louis J. and Darrell Parker. “Sources of Prevailing Differences in Unemployment Rates. Review of Regional Studies 28 (Fall 1998): 35–46.

    Google Scholar 

  • Partridge, Mark D. and Dan S. Rickman. “Differences in State Unemployment Rates: The Role of Labor and Product Market Structural Shifts. Southern Economic Journal 62 (July 1995): 89–106.

    Article  Google Scholar 

  • Phillips, Alban W. “The Relationship Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957. Economica 25 (November 1958): 283–99.

    Google Scholar 

  • Summers, Lawrence. “Why is the Unemployment Rate So Very High Near Full Employment? Brookings Papers on Economic Activity 1 (1986): 339–83.

    Article  Google Scholar 

  • Topel, Robert H. “Local Labor Markets. Journal of Political Economy 94 (June 1986): 111–43.

    Article  Google Scholar 

  • Wessels, Walter J. “Do Unions Contract for Added Employment? Industrial and Labor Relations Review 45 (October 1991): 181–93.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Winthrop University, 29733, Rock Hill, SC

    Lou Pantuosco, Darrell Parker & Gary Stone

Authors
  1. Lou Pantuosco
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Darrell Parker
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Gary Stone
    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

Pantuosco, L., Parker, D. & Stone, G. The effect of unions on labor markets and economic growth: An analysis of state data. J Labor Res 22, 195–205 (2001). https://doi.org/10.1007/s12122-001-1012-0

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12122-001-1012-0

Keywords

  • Unemployment Rate
  • Productivity Growth
  • Employment Growth
  • Union Membership
  • Union Density