Unions and Economic Performance in Developing Countries: Case Studies from Latin America
Main Article Content
Keywords
Unions, Productivity, Latin America, Developing Countries
Abstract
This paper analyzes the economic impact of unions on productivity in the manufacturing sector across six Latin American countries: Argentina, Bolivia, Chile, Mexico, Uruguay, and Panama. Using an augmented Cobb-Douglas production function, the paper finds that unions have positive, but mostly small, effects on productivity, with the exception of Argentina, with a large negative effect, and Bolivia, with no effect. An analysis on profitability shows that, in most cases, the positive productivity effects barely offset higher union compensation, and that unions are negatively related to investment in capital and R & D. Different explanations for these effects are discussed.
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References
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Addison, J. T., and Hirsch, B. T. (1989). Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived? Journal of Labor Economics, 7(1), 72-105.
Aitken, B., Harrison, A., and Lipsey, R. E. (1996). Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States. Journal of International Economics, 40 (3–4), 345-371.
Alexander, R. J., and Parker, E. M. (2005). A History of Organized Labor in Bolivia. Westport, CT: Praeger Pub Text.
Allen, S. G. (1984). Unionized Construction Workers Are More Productive. The Quarterly Journal of Economics, 99 (2), 251-274.
Anner, M. (2008). Meeting the Challenges of Industrial Restructuring: Labor Reform and Enforcement in Latin America. Latin American Politics and Society, 50(2), 33-65.
Baldwin, C. Y. (1983). Productivity and Labor Unions: An Application of the Theory of Self- Enforcing Contracts. The Journal of Business, 56 (2), 155-185.
Black, S. E., and Lynch, L. M. (2001). How to Compete: The Impact of Workplace Practices and Information Technology on Productivity. Review of Economics and Statistics, 83 (3), 434-445.
Bloom, N., and Reenen, J. V. (2011). Chapter 19 Human Resource Management and Productivity. In O. Ashenfelter and D. Card (Eds.), Handbook of Labor Economics (Vol. Volume 4, Part B, pp. 1697-1767): Elsevier.
Brown, C., and Medoff, J. (1978). Trade Unions in the Production Process. The Journal of Political Economy, 86 (3), 355-378.
Campero, G. (2001). Trade union responses to globalization:Chile. Discussion Paper DP/126/2001. International Institute for Labour Studies.
Carrière, J., Haworth, N., and Roddick, J. (1989). The State, Industrial Relations and the Labour Movement in Latin America. New York: St. Martin's Press.
Cassoni, A., Allen, S. G., and Labadie, G. J. (2004). Unions and Employment in Uruguay. In J. Heckman and C. Pages (Eds.), Law and Employment:Lessons from Latin American and the Caribbean: University of Chicago Press.
Cassoni, A., Labadie, G, J., and Fachola, G. (2005). The Economic Effects of Unions in Latin America: Their Impact on Wages and the Economic Performance in Uruguay. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Christensen, L. R., Jorgenson, D. W., and Lau, L. J. (1973). Transcendental Logarithmic Production Frontiers. The Review of Economics and Statistics, 55 (1), 28-45.
Connolly, R. A., Hirsch, B. T., and Hirschey, M. (1986). Union Rent Seeking, Intangible Capital, and Market Value of the Firm. The Review of Economics and Statistics, 68 (4), 567-577.
DiNardo, J., and Lee, D. S. (2004). Economic Impacts of New Unionization on Private Sector Employers: 1984–2001. The Quarterly Journal of Economics, 119(4), 1383-1441.
Doucouliagos, C., and Laroche, P. (2003). What do Unions do to Productivity? A Meta-Analysis. Industrial Relations: A Journal of Economy and Society, 42 (4), 650-691.
Doucouliagos, C., and Laroche, P. (2009). Unions and Profits: A Meta-Regression Analysis. Industrial Relations: A Journal of Economy and Society, 48 (1), 146-184
Doucouliagos, C., and Laroche, P. (2013). Unions and Innovation: New Insights From the Cross-Country Evidence. Industrial Relations: A Journal of Economy and Society, 52 (2), 467-491.
Edwards, S. (1989). The Debt Crisis and Economic Adjustment in Latin America. Latin American Research Review, 24(3), 172-186.
Fairris, D. (2003). Unions and Wage Inequality in Mexico. Industrial and Labor Relations Review, 56 (3), 481-497.
Fairris, D. (2006). Union Voice Effects in Mexico. British Journal of Industrial Relations, 44 (4), 781-800.
Falaris, E. M. (2008). A Quantile Regression Analysis of Wages in Panama. Review of Development Economics, 12 (3), 498-514.
Freeman, R. B. (2010). Chapter 70 Labor Regulations, Unions, and Social Protection in Developing Countries: Market Distortions or Efficient Institutions?. In D. Rodrik and M. Rosenzweig (Eds.), Handbook of Development Economics (Vol. Volume 5, pp. 4657-4702): Elsevier.
Freeman, R. B., and Medoff, J. L. (1984). What Do Unions Do? (Vol. 23): Basic Books New York.
Fuchs, V. R., Krueger, A. B., and Poterba, J. M. (1998). Economists' Views About Parameters, Values, and Policies: Survey Results in Labor and Public Economics. Journal of Economic Literature, 36(3), 1387-1425.
Graham, J. W., Hofer, S. M., Donaldson, S. I., MacKinnon, D. P., and Schafer, J. L. (1997). Analysis with missing data in prevention research The science of prevention: Methodological advances from alcohol and substance abuse research (pp. 325-366).
Hayter, S., and Stoevska, V. (2011). Social Dialogue Indicators: International Statistical Inquiry 2008-09. Technical Brief. International Labour Office.
Hirsch, B. T. (1991). Labor Unions and the Economic Performance of Firms. Kalamazoo, Michigan: Upjohn Institute for Economic Research.
Hirsch, B. T. (2004). What do Unions do for Economic Performance?. Journal of Labor Research, 25 (3), 415-455.
Hirsch, B. T. (2008). Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?. Journal of Economic Perspectives, 22(1), 153-176.
Hirsch, B. T., and Addison, J. T. (1986). The Economic Analysis of Unions: New Approaches and Evidence: Allen and Unwin.
Hirsch, B. T., and Connolly, R. A. (1987). Do Unions Capture Monopoly Profits?. Industrial and Labor Relations Review, 41 (1), 118-136.
Horton, N. J., and Lipsitz, S. R. (2001). Multiple Imputation in Practice. The American Statistician, 55 (3), 244-254.
Hudson, R. A. (Ed.). (1994). Chile: A Country Study. Washington, D.C.: Federal Research Division, Library of Congress.
Hudson, R. A., and Hanratty, D. M. (Eds.). (1991). Bolivia: A Country Study. Washington, D.C. : Federal Research Division, Library of Congress.
Hudson, R. A., and Meditz, S. W. (Eds.). (1992). Uruguay: A Country Study. Washington, D.C. : Federal Research Division, Library of Congress.
ITUC. (2007). Annual Survey of Violations of Trade Union Rights. http://survey07.ituc-csi.org/getcontinent.php?IDContinent=0&IDLang=EN
Kaufman, B. E. (2004). What Unions Do: Insights From Economic Theory. Journal of Labor Research, 25(3), 351-382.
Kleiner, M. M., Leonard, J. S., and Pilarski, A. M. (2002). How industrial relations affects plant performance : the case of commercial aircraft manufacturing. Industrial and Labor Relations Review, 55 (2), 195-218.
Kuhn, P. (1985). Union Productivity Effects and Economic Efficiency. Journal of Labor Research, 6 (3), 229.
Kuhn, P. (1998). Unions and the Economy: What We Know; What We Should Know. The Canadian Journal of Economics / Revue canadienne d'Economique, 31 (5), 1033-1056.
Lee, D. and Mas A. (2012). Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961–1999. The Quarterly Journal of Economics,127 (1) , 333–378.
Little, R. J. A., and Rubin, D. B. (2002). Statistical analysis with missing data (2nd ed. ed.). New York: John Wiley and Sons.
Machin, S., and Wadhwani, S. (1991). The Effects of Unions on Investment and Innovation: Evidence From Wirs. The Economic Journal, 101 (405), 324-330.
Mansilla, H. C. F. (1993). Apogeo y Declinacion del Movimiento Sindical Boliviano. Revista de Estudios Politicos (79), 227-245.
Meditz, S. W., and Hanratty, D. M. (Eds.). (1989). Panama: a country Study: Federal Research Division, Library of Congress.
Menezes-Filho, N., Zylberstajn, H., Chahad, J. P., and Pazello, E. (2005). Unions and the Economic Performance of Brazilian Establishments. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Merrill, T., and Miró, R. (Eds.). (1997). Mexico: A Country Study. Washington, D.C.: Federal Research Division, Library of Congress.
Murillo, M. V. (2000). From Populism to Neoliberalism: Labor Unions and Market Reforms in Latin America. World Politics, 52 (2), 135-174.
Murillo, M. V., and Schrank, A. (2005). With a Little Help from my Friends. Comparative Political Studies, 38 (8), 971-999.
O'Connell, L. D. (1999). Collective Bargaining Systems in 6 Latin American Countries: Degrees of Autonomy and Decentralization. Inter-American Development Bank, Office of the Chief Economist, Working paper, 399.
OECD. (1996). Trade, Employment and Labour Standards: A Study of Core Workers' Rights and International Trade. Paris France: OECD Publishing.
Rios-Avila, F. and Hirsch B.T. (forthcoming). Unions, Wages Gaps and Wage Dispersion: New Evidence from the Americas. Industrial Relations: A Journal of Economy and Society.
Ronconi, L. (2012). Globalization, Domestic Institutions, and Enforcement of Labor Law: Evidence from Latin America. Industrial Relations: A Journal of Economy and Society, 51(1), 89-105.
Rubin, D. B. (1987). Multiple imputation for nonresponse in surveys. New York: John Wiley & Sons, Inc.
Saavedra, J., and Torero, M. (2005). Union Density Changes and Union Effects on Firm Performance in Peru. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Turnbull, P. J. (1991). Trade Unions and Productivity: Opening the Harvard "Black Boxes". Journal of Labor Research, 12 (2), 135-150.
Ulloa, V. (2003). El Movimiento Sindical Chileno del Siglo XX Hasta Nuestros Días: OIT, Oficina Internacional del Trabajo. Textos de Capacitacion.
Urizar H., C., and Lee, S. (2005). The Effects of Unions on Productivity: Evidence From Large Coffee Producers in Guatemala. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
van Buuren, S. (2007). Multiple imputation of discrete and continuous data by fully conditional specification. Statistical Methods in Medical Research, 16 (3), 219-242.
Vergara, M.. (1998). Incremento de Remuneraciones Asociados a Aumentos de Productividad Aportes al Debate Laboral 5. Department of Labor: Chile.
Wessels, W. J. (1994). Do Unionized Firms Hire Better Workers? Economic Inquiry, 32 (4), 616-629.
World Bank (2006). Latin American Enterprise Surveys Data set. World Bank, Washington, DC. Available at http://www.enterprisesurveys.org/Data
Addison, J. T., and Hirsch, B. T. (1989). Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived? Journal of Labor Economics, 7(1), 72-105.
Aitken, B., Harrison, A., and Lipsey, R. E. (1996). Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States. Journal of International Economics, 40 (3–4), 345-371.
Alexander, R. J., and Parker, E. M. (2005). A History of Organized Labor in Bolivia. Westport, CT: Praeger Pub Text.
Allen, S. G. (1984). Unionized Construction Workers Are More Productive. The Quarterly Journal of Economics, 99 (2), 251-274.
Anner, M. (2008). Meeting the Challenges of Industrial Restructuring: Labor Reform and Enforcement in Latin America. Latin American Politics and Society, 50(2), 33-65.
Baldwin, C. Y. (1983). Productivity and Labor Unions: An Application of the Theory of Self- Enforcing Contracts. The Journal of Business, 56 (2), 155-185.
Black, S. E., and Lynch, L. M. (2001). How to Compete: The Impact of Workplace Practices and Information Technology on Productivity. Review of Economics and Statistics, 83 (3), 434-445.
Bloom, N., and Reenen, J. V. (2011). Chapter 19 Human Resource Management and Productivity. In O. Ashenfelter and D. Card (Eds.), Handbook of Labor Economics (Vol. Volume 4, Part B, pp. 1697-1767): Elsevier.
Brown, C., and Medoff, J. (1978). Trade Unions in the Production Process. The Journal of Political Economy, 86 (3), 355-378.
Campero, G. (2001). Trade union responses to globalization:Chile. Discussion Paper DP/126/2001. International Institute for Labour Studies.
Carrière, J., Haworth, N., and Roddick, J. (1989). The State, Industrial Relations and the Labour Movement in Latin America. New York: St. Martin's Press.
Cassoni, A., Allen, S. G., and Labadie, G. J. (2004). Unions and Employment in Uruguay. In J. Heckman and C. Pages (Eds.), Law and Employment:Lessons from Latin American and the Caribbean: University of Chicago Press.
Cassoni, A., Labadie, G, J., and Fachola, G. (2005). The Economic Effects of Unions in Latin America: Their Impact on Wages and the Economic Performance in Uruguay. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Christensen, L. R., Jorgenson, D. W., and Lau, L. J. (1973). Transcendental Logarithmic Production Frontiers. The Review of Economics and Statistics, 55 (1), 28-45.
Connolly, R. A., Hirsch, B. T., and Hirschey, M. (1986). Union Rent Seeking, Intangible Capital, and Market Value of the Firm. The Review of Economics and Statistics, 68 (4), 567-577.
DiNardo, J., and Lee, D. S. (2004). Economic Impacts of New Unionization on Private Sector Employers: 1984–2001. The Quarterly Journal of Economics, 119(4), 1383-1441.
Doucouliagos, C., and Laroche, P. (2003). What do Unions do to Productivity? A Meta-Analysis. Industrial Relations: A Journal of Economy and Society, 42 (4), 650-691.
Doucouliagos, C., and Laroche, P. (2009). Unions and Profits: A Meta-Regression Analysis. Industrial Relations: A Journal of Economy and Society, 48 (1), 146-184
Doucouliagos, C., and Laroche, P. (2013). Unions and Innovation: New Insights From the Cross-Country Evidence. Industrial Relations: A Journal of Economy and Society, 52 (2), 467-491.
Edwards, S. (1989). The Debt Crisis and Economic Adjustment in Latin America. Latin American Research Review, 24(3), 172-186.
Fairris, D. (2003). Unions and Wage Inequality in Mexico. Industrial and Labor Relations Review, 56 (3), 481-497.
Fairris, D. (2006). Union Voice Effects in Mexico. British Journal of Industrial Relations, 44 (4), 781-800.
Falaris, E. M. (2008). A Quantile Regression Analysis of Wages in Panama. Review of Development Economics, 12 (3), 498-514.
Freeman, R. B. (2010). Chapter 70 Labor Regulations, Unions, and Social Protection in Developing Countries: Market Distortions or Efficient Institutions?. In D. Rodrik and M. Rosenzweig (Eds.), Handbook of Development Economics (Vol. Volume 5, pp. 4657-4702): Elsevier.
Freeman, R. B., and Medoff, J. L. (1984). What Do Unions Do? (Vol. 23): Basic Books New York.
Fuchs, V. R., Krueger, A. B., and Poterba, J. M. (1998). Economists' Views About Parameters, Values, and Policies: Survey Results in Labor and Public Economics. Journal of Economic Literature, 36(3), 1387-1425.
Graham, J. W., Hofer, S. M., Donaldson, S. I., MacKinnon, D. P., and Schafer, J. L. (1997). Analysis with missing data in prevention research The science of prevention: Methodological advances from alcohol and substance abuse research (pp. 325-366).
Hayter, S., and Stoevska, V. (2011). Social Dialogue Indicators: International Statistical Inquiry 2008-09. Technical Brief. International Labour Office.
Hirsch, B. T. (1991). Labor Unions and the Economic Performance of Firms. Kalamazoo, Michigan: Upjohn Institute for Economic Research.
Hirsch, B. T. (2004). What do Unions do for Economic Performance?. Journal of Labor Research, 25 (3), 415-455.
Hirsch, B. T. (2008). Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?. Journal of Economic Perspectives, 22(1), 153-176.
Hirsch, B. T., and Addison, J. T. (1986). The Economic Analysis of Unions: New Approaches and Evidence: Allen and Unwin.
Hirsch, B. T., and Connolly, R. A. (1987). Do Unions Capture Monopoly Profits?. Industrial and Labor Relations Review, 41 (1), 118-136.
Horton, N. J., and Lipsitz, S. R. (2001). Multiple Imputation in Practice. The American Statistician, 55 (3), 244-254.
Hudson, R. A. (Ed.). (1994). Chile: A Country Study. Washington, D.C.: Federal Research Division, Library of Congress.
Hudson, R. A., and Hanratty, D. M. (Eds.). (1991). Bolivia: A Country Study. Washington, D.C. : Federal Research Division, Library of Congress.
Hudson, R. A., and Meditz, S. W. (Eds.). (1992). Uruguay: A Country Study. Washington, D.C. : Federal Research Division, Library of Congress.
ITUC. (2007). Annual Survey of Violations of Trade Union Rights. http://survey07.ituc-csi.org/getcontinent.php?IDContinent=0&IDLang=EN
Kaufman, B. E. (2004). What Unions Do: Insights From Economic Theory. Journal of Labor Research, 25(3), 351-382.
Kleiner, M. M., Leonard, J. S., and Pilarski, A. M. (2002). How industrial relations affects plant performance : the case of commercial aircraft manufacturing. Industrial and Labor Relations Review, 55 (2), 195-218.
Kuhn, P. (1985). Union Productivity Effects and Economic Efficiency. Journal of Labor Research, 6 (3), 229.
Kuhn, P. (1998). Unions and the Economy: What We Know; What We Should Know. The Canadian Journal of Economics / Revue canadienne d'Economique, 31 (5), 1033-1056.
Lee, D. and Mas A. (2012). Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961–1999. The Quarterly Journal of Economics,127 (1) , 333–378.
Little, R. J. A., and Rubin, D. B. (2002). Statistical analysis with missing data (2nd ed. ed.). New York: John Wiley and Sons.
Machin, S., and Wadhwani, S. (1991). The Effects of Unions on Investment and Innovation: Evidence From Wirs. The Economic Journal, 101 (405), 324-330.
Mansilla, H. C. F. (1993). Apogeo y Declinacion del Movimiento Sindical Boliviano. Revista de Estudios Politicos (79), 227-245.
Meditz, S. W., and Hanratty, D. M. (Eds.). (1989). Panama: a country Study: Federal Research Division, Library of Congress.
Menezes-Filho, N., Zylberstajn, H., Chahad, J. P., and Pazello, E. (2005). Unions and the Economic Performance of Brazilian Establishments. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Merrill, T., and Miró, R. (Eds.). (1997). Mexico: A Country Study. Washington, D.C.: Federal Research Division, Library of Congress.
Murillo, M. V. (2000). From Populism to Neoliberalism: Labor Unions and Market Reforms in Latin America. World Politics, 52 (2), 135-174.
Murillo, M. V., and Schrank, A. (2005). With a Little Help from my Friends. Comparative Political Studies, 38 (8), 971-999.
O'Connell, L. D. (1999). Collective Bargaining Systems in 6 Latin American Countries: Degrees of Autonomy and Decentralization. Inter-American Development Bank, Office of the Chief Economist, Working paper, 399.
OECD. (1996). Trade, Employment and Labour Standards: A Study of Core Workers' Rights and International Trade. Paris France: OECD Publishing.
Rios-Avila, F. and Hirsch B.T. (forthcoming). Unions, Wages Gaps and Wage Dispersion: New Evidence from the Americas. Industrial Relations: A Journal of Economy and Society.
Ronconi, L. (2012). Globalization, Domestic Institutions, and Enforcement of Labor Law: Evidence from Latin America. Industrial Relations: A Journal of Economy and Society, 51(1), 89-105.
Rubin, D. B. (1987). Multiple imputation for nonresponse in surveys. New York: John Wiley & Sons, Inc.
Saavedra, J., and Torero, M. (2005). Union Density Changes and Union Effects on Firm Performance in Peru. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
Turnbull, P. J. (1991). Trade Unions and Productivity: Opening the Harvard "Black Boxes". Journal of Labor Research, 12 (2), 135-150.
Ulloa, V. (2003). El Movimiento Sindical Chileno del Siglo XX Hasta Nuestros Días: OIT, Oficina Internacional del Trabajo. Textos de Capacitacion.
Urizar H., C., and Lee, S. (2005). The Effects of Unions on Productivity: Evidence From Large Coffee Producers in Guatemala. In P. Kuhn and G. Márquez (Eds.), What Difference Do Unions Make? Their Impact on Productivity and Wages in Latin America: Inter-American Development Bank.
van Buuren, S. (2007). Multiple imputation of discrete and continuous data by fully conditional specification. Statistical Methods in Medical Research, 16 (3), 219-242.
Vergara, M.. (1998). Incremento de Remuneraciones Asociados a Aumentos de Productividad Aportes al Debate Laboral 5. Department of Labor: Chile.
Wessels, W. J. (1994). Do Unionized Firms Hire Better Workers? Economic Inquiry, 32 (4), 616-629.
World Bank (2006). Latin American Enterprise Surveys Data set. World Bank, Washington, DC. Available at http://www.enterprisesurveys.org/Data