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Do Industrial Relations Institutions Impact Economic Outcomes?: International and U.S. State-Level Evidence

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  • Morris M. Kleiner
  • Hwikwon Ham

Abstract

The impact of government social and labor market institutions on economic outcomes have generated a great deal of attention by economists and policymakers in the U.S. and in other nations. The theoretical model suggests that there are trade offs of higher levels of economic outcomes with more equity-producing labor market institutions. This study examines the impact of national levels of unionization, strike levels, public policies toward labor, and the structure of collective bargaining within a nation on a country's foreign direct investment (FDI). As an additional test of the relationship of labor market institutions and state labor market policies and economic outcomes, we examine the empirical relationship with the economic growth of U.S. states. Examining 20 OECD nations from 1985 through 1995 and all U.S. states from 1990 to 1999, our statistical analysis shows that higher levels of industrial relations institutions are usually associated with lower levels of FDI and slower economic growth for U.S. states. However, within the context of the model the results do not necessarily suggest that a nation or state would be better off trading social equity through fewer restrictive industrial relations institutions for higher levels of economic growth.

Suggested Citation

  • Morris M. Kleiner & Hwikwon Ham, 2002. "Do Industrial Relations Institutions Impact Economic Outcomes?: International and U.S. State-Level Evidence," NBER Working Papers 8729, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8729
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    References listed on IDEAS

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    1. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
    2. Robert E. Lipsey, 2000. "Interpreting Developed Countries' Foreign Direct Investment," NBER Working Papers 7810, National Bureau of Economic Research, Inc.
    3. Barry T. Hirsch, 1991. "Labor Unions and the Economic Performance of Unions," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number luepf, November.
    4. David H. Autor & John J. Donohue & Stewart J. Schwab, 2006. "The Costs of Wrongful-Discharge Laws," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 211-231, May.
    5. Engen, Eric M. & Skinner, Jonathan, 1996. "Taxation and Economic Growth," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 617-642, December.
    6. Richard B. Freeman, 1994. "Crime and the Job Market," NBER Working Papers 4910, National Bureau of Economic Research, Inc.
    7. Richard B. Freeman, 2000. "Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes," NBER Working Papers 7556, National Bureau of Economic Research, Inc.
    8. John Budd & Yijiang Wang, "undated". "Labor Policy and Investment," Working Papers 0502, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
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    Cited by:

    1. Mazzanti, Massimiliano & Pini, Paolo & Tortia, Ermanno, 2006. "Organizational innovations, human resources and firm performance: The Emilia-Romagna food sector," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 123-141, February.
    2. Jane Frances, 2004. "Institutions, Firms and Economic Growth," Treasury Working Paper Series 04/19, New Zealand Treasury.
    3. Roxana Radulescu & Martin Robson, 2008. "Trade Unions, Wage Bargaining Coordination, and Foreign Direct Investment," LABOUR, CEIS, vol. 22(4), pages 661-678, December.

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    More about this item

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • F2 - International Economics - - International Factor Movements and International Business

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