The productivity puzzle and the decline of unions

Aruni Mitra

Journal of Economic Dynamics and Control, 2024, vol. 159, issue C

Abstract: This paper finds that rapid de-unionization can explain the sudden vanishing of the procyclicality of productivity in the U.S. during the 1980s, a phenomenon dubbed the ‘productivity puzzle’. Cross-sectional evidence from U.S. states and industries shows that a decline in union power led to a decrease in the cost of hiring and firing workers, which prompted firms to rely less on labor hoarding, making productivity less procyclical. In a model with endogenous worker effort, a decrease in employment adjustment cost by the amount implied by de-unionization explains a significant part of the observed decline in the procyclicality of productivity.

Keywords: Productivity; Unions; Employment adjustment cost; Factor utilization; DSGE (search for similar items in EconPapers)
JEL-codes: E22 E23 E24 E32 J50 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: The Productivity Puzzle and the Decline of Unions (2021)
Working Paper: The Productivity Puzzle and the Decline of Unions (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:159:y:2024:i:c:s0165188923002129

DOI: 10.1016/j.jedc.2023.104806

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