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The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies

Sudheer Chava, András Danis and Alex Hsu

Journal of Financial Economics, 2020, vol. 137, issue 2, 451-469

Abstract: We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.

Keywords: Right to work; Collective bargaining; Unions; Wage growth; Investment (search for similar items in EconPapers)
JEL-codes: J31 J50 G31 G32 G38 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jfineco.2020.02.005

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Handle: RePEc:eee:jfinec:v:137:y:2020:i:2:p:451-469