Long-run impacts of unions on firms: new evidence from financial markets, 1961-1999

TitleLong-run impacts of unions on firms: new evidence from financial markets, 1961-1999
Publication TypeJournal Article
Year of Publication2012
AuthorsLee DS, Mas A
JournalQuarterly journal of economics
Pagination - 378
Date PublishedFeb 2012
ISBN Number0033-5533, 0033-5533
KeywordsEconomics, Estimation, Labour relations, National Labor Relations Board, Private sector, Samples, Stock exchange, Stock returns, Trade unions, U.S.A., Unionization
AbstractWe estimate the effect of new private-sector unionization on publicly traded firms' equity value in the United States 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 $40,500 per unionized worker, an effect that takes 15 to 18 months after unionization to fully materialize, and one that could not be detected by a short-run event study. 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 smaller 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. Reprinted by permission of the MIT Press