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Unionism, Price-Cost Margins, and the Return to Capital

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  • Richard B. Freeman

Abstract

This paper examines available industry data on two profitability measures, the price-cost margin and the ratio of quasi-rents to capital, for the purpose of determining the effect of unionism on profits. It finds that unionism reduces profitability and that this effect occurs in highly concentrated industries. The effect of unionism is quite substantial in most calculations, suggesting that the fraction organized in a sector be included in standard Industrial Organization profitability calculations in the future.

Suggested Citation

  • Richard B. Freeman, 1983. "Unionism, Price-Cost Margins, and the Return to Capital," NBER Working Papers 1164, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1164
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    References listed on IDEAS

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    1. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-378, June.
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    3. Richard R. Nelson, 1957. "Increased Rents from Increased Costs: A Paradox of Value Theory," Journal of Political Economy, University of Chicago Press, vol. 65(5), pages 387-387.
    4. Bradburd, Ralph M & Caves, Richard E, 1982. "A Closer Look at the Effect of Market Growth on Industries' Profits," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 635-645, November.
    5. Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-263, October.
    6. Weiss, Leonard W, 1972. "The Geographic Size of Markets in Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 245-257, August.
    7. Michael Gort & Rao Singamsetti, 1976. "Concentration and Profit Rates: New Evidence on an Old Issue," NBER Chapters, in: Explorations in Economic Research, Volume 3, number 1, pages 1-20, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Richard B. Freeman & Morris M. Kleiner, 1999. "Do Unions Make Enterprises Insolvent?," ILR Review, Cornell University, ILR School, vol. 52(4), pages 510-527, July.
    2. Vassilis Monastiriotis, 2003. "Union Retreat and Regional Economic Performance: the UK in the 1990s," Urban/Regional 0302006, University Library of Munich, Germany.
    3. Cowling, Keith, 1990. "Monopoly Capitalism Revisited," Economic Research Papers 268484, University of Warwick - Department of Economics.
    4. Bishwanath GOLDAR & Suresh Chand AGGARWAL, 2005. "Trade Liberalization And Price-Cost Margin In Indian Industries," The Developing Economies, Institute of Developing Economies, vol. 43(3), pages 346-373, September.
    5. Cowling, K., 1990. "Monopoly Capitalism Revisited," The Warwick Economics Research Paper Series (TWERPS) 365, University of Warwick, Department of Economics.
    6. Ann P. Bartel & Lacy Glenn Thomas, 1985. "Predation through Regulation: The Wage and Profit Impacts of OSHA and EPA," NBER Working Papers 1660, National Bureau of Economic Research, Inc.
    7. Laroche, Patrice, 2020. "Unions, Collective Bargaining and Firm Performance," GLO Discussion Paper Series 728, Global Labor Organization (GLO).
    8. Thomas Karier, 1988. "New Evidence on the Effect of Unions and Imports on Monopoly Power," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 10(3), pages 414-427, March.
    9. Harris, Richard G., 1989. "The New Protectionism Revisited," Queen's Institute for Economic Research Discussion Papers 275219, Queen's University - Department of Economics.
    10. B.N. Goldar & Sureshchand Aggarwal, 2004. "Trade liberalisation and price-cost margin in Indian industries," Indian Council for Research on International Economic Relations, New Delhi Working Papers 130, Indian Council for Research on International Economic Relations, New Delhi, India.
    11. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
    12. Adnan Wifag, 2014. "Examining Industry Wage Differentials in the Palestinian Territories," Review of Middle East Economics and Finance, De Gruyter, vol. 10(2), pages 1-28, August.
    13. S. Dobbelaere, 2003. "Joint Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/171, Ghent University, Faculty of Economics and Business Administration.
    14. James Peoples, Jr., 1990. "Airline Deregulation and Industry Wage Levels," Eastern Economic Journal, Eastern Economic Association, vol. 16(1), pages 49-58, Jan-Mar.

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