Unionization and Cost of Production: Compensation, Productivity, and Factor-Use Effects

Randall Eberts and Joe Stone

Journal of Labor Economics, 1991, vol. 9, issue 2, 171-85

Abstract: Unionization affects costs of production through compensation premia, technology shifts, and deviations from the least-cost combination of inputs. The first two are familiar, but the last is not. This article distinguishes the three effects, illustrates the factor-use effect, and suggests that it may resolve several apparent inconsistencies: union-induced cost effects appear larger than those implied by union compensation and productivity differentials; union compensation and productivity differentials suggest a larger effect on labor intensity of output than is observed; and employers complain that union work rules reduce productivity when there is little evidence that this is so. Copyright 1991 by University of Chicago Press.

Date: 1991
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Working Paper: Unionization and cost of production: compensation, productivity, and factor-use effects (1987)
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