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Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961-1999

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  • Lee, David S.
  • Mas, Alexandre

Abstract

We estimate the effect of new unionization on firms’ equity value over the 1961-1999 period using a newly assembled sample of National Labor Relations Board (NLRB) representation elections matched to stock market data. Event-study estimates show an average union effect on the equity value of the firm equivalent to a cost of at least $40,500 per unionized worker. At the same time, point estimates from a regression-discontinuity design – comparing the stock market impact of close union election wins to close losses – are considerably maller and close to zero. We find a negative relationship between the cumulative abnormal returns and the vote share in support of the union, allowing us to reconcile these seemingly contradictory findings. Using the magnitudes from the analysis, we calibrate a structural “median voter” model of endogenous union determination in order to conduct counterfactual policy simulations of policies that would marginally increase the ease of unionization.

Suggested Citation

  • Lee, David S. & Mas, Alexandre, 2009. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961-1999," Institute for Research on Labor and Employment, Working Paper Series qt1j93n8gj, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt1j93n8gj
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    More about this item

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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