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Outsourcing and Unionisation: A tale of misallocated (resistance) resources

Author

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  • Elisabetta Magnani

    (The University of New South Wales)

  • David Prentice

    (Department of Economics and Finance, La Trobe University)

Abstract

Is there any glue that may tie together the future of US unionism and the trend towards disintegration of the firm? This paper addresses this question by investigating the effect of outsourcing on US unionisation. Using a new dataset for the US manufacturing sector from 1973 to 1994, we quantify the effect of outsourcing on 3-digit industries quasi-rents, employment, union wage premia and union densities. Instrumental Variables estimation techniques show that outsourcing has contributed to higher quasi-rents and increased quasi-rents per plant and industry employment. While the premium of substitutable workers is not affected by the extent of outsourcing, we find evidence that unionised workers employed in jobs that are not substitutes of the tasks being outsourced gain from outsourcing. Finally, we find no support to the claim that outsourcing reduces union density. This set of results sharply contrasts with the dominant view according to which internal labour markets (and unionisation) have little to gain from market mediated employment arrangements.

Suggested Citation

  • Elisabetta Magnani & David Prentice, 2006. "Outsourcing and Unionisation: A tale of misallocated (resistance) resources," Working Papers 2006.03 EDIRC Provider-In, School of Economics, La Trobe University.
    • Handle: RePEc:ltr:wpaper:2006.03
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    Cited by:

    1. Buss, Philipp & Peukert, Christian, 2015. "R&D outsourcing and intellectual property infringement," Research Policy, Elsevier, vol. 44(4), pages 977-989.
    2. García-Vega, María & Huergo, Elena, 2019. "The role of international and domestic R&D outsourcing for firm innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 775-792.
    3. Elisabetta Magnani, 2012. "Vertical disintegration and training: evidence from a matched employer–employee survey," Journal of Productivity Analysis, Springer, vol. 38(2), pages 199-217, October.

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    More about this item

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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