Do labour unions help or hurt firms to invest in the long run? Evidence from Korea

Ilhang Shin and Sanghyun Hwang

Applied Economics Letters, 2021, vol. 28, issue 17, 1499-1504

Abstract: This paper empirically addresses how labour unions affect firms’ long-term investment decisions and, thus, performances by utilizing unique firm-level data on labour unions available in Korea. We find that labour unionization makes firms invest more in human resource but less in physical capital. In addition, we show that as labour unions engage in rent-seeking behaviour, this causes firms’ investment decisions to be so distorted that the firms with labour unions get less productive, and consequently, the capital market valuates them less. Our empirical findings suggest that the problem of deciding proper investment could become more serious in the long run, if the labour unions participate in management and exercise their collective bargaining power to accomplish their interests as rent-seekers.

Date: 2021
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DOI: 10.1080/13504851.2020.1828565

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