The Dynamic Effects of Unionization on Productivity

Sebastian Gallardo and Esteban Puentes

Working Papers from University of Chile, Department of Economics

Abstract: We study the dynamic effects of unionization on firm productivity in Chile using panel data from the Longitudinal Business Survey (ELE), conducted in 2015, 2017, 2019, and 2022. We identify as treated firms those that transition from no union presence to having at least one union during the sample period, and compare them to matched controls drawn from firms that remain non-unionized throughout. Employing a matched event study design with two within-sector matching specifications, we find that value added and TFP increase gradually, becoming statistically significant at four and five years after unionization. We find no statistically significant effect on the profit rate, consistent with productivity gains offsetting higher labor costs. Wages increase significantly at four years after unionization, and worker turnover declines significantly starting one period after unionization, consistent with the voice mechanism. We also find no significant effect on the share of subcontracted workers, which rejects the hypothesis that unionization induces firms to reorganize their labor relations through outsourcing.

Pages: 49 pages
Date: 2026-04
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