A Note on Unionization and the Elasticity of Substitution

Dennis R. Maki and Lindsay N. Meredith

Canadian Journal of Economics, 1987, vol. 20, issue 4, 792-801

Abstract: If unions "force employers off their demand curves" the measured elasticity of substitutio n should be lower where unionization is stronger. Estimates based on pooled data for twenty two-digit SIC Canadian manufacturing industrie s over the period 1971-81 support this proposition. Point estimates a re that the elasticity is 1.98 in the absence of unions, 1.04 if empl oyees are fifty percent unionized, and only 0.10 if employees are one hundred percent unionized. However, the results are not very robust to specification changes.

Date: 1987
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