The Productivity Puzzle and the Decline of Unions

Aruni Mitra

MPRA Paper from University Library of Munich, Germany

Abstract: This paper argues that rapid de-unionization during the 1980s can explain the sudden vanishing of the procyclicality of productivity in the U.S. I use cross-sectional evidence from U.S. states and industries to argue that the lower cost of hiring and firing workers due to the decline in union power prompted firms to rely less on labour hoarding, making productivity less procyclical. Allowing the hiring cost to decrease by the same proportion as the decline in union density can match almost the entire drop in cyclical productivity correlations in a model with endogenous effort and costly employment adjustment.

Keywords: productivity; unions; hiring cost; factor utilization; DSGE (search for similar items in EconPapers)
JEL-codes: E22 E23 E24 E32 J50 (search for similar items in EconPapers)
Date: 2021-10-03
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-eff, nep-mac and nep-ore
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https://mpra.ub.uni-muenchen.de/110961/9/MPRA_paper_110961.pdf original version (application/pdf)

Related works:
Journal Article: The productivity puzzle and the decline of unions (2024)
Working Paper: The Productivity Puzzle and the Decline of Unions (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:110961

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