We study the effect of private-sector unionization on establishment employment and survival. Specifically, we analyze National Labor Relations Board union elections from 1981'2005 using administrative Census data. Our empirical strategy extends standard difference-in-differences techniques with regression discontinuity extrapolation methods. This allows us to avoid biases from only comparing close elections and to estimate treatment effects that include larger marginof- victory elections. Using this strategy, we show that unionization decreases an establishment's employment and likelihood of survival, particularly in manufacturing and other blue-collar and industrial sectors. We hypothesize that two reasons for these effects are firms' ability to avoid working with new unions and employers' opposition to unions. We find that the negative effects are significantly larger for elections at multi-establishment firms. Additionally, after a successful union election at one establishment, employment increases at the firms' other establishments. Both pieces of evidence are consistent with firms avoiding new unions by shifting production from unionized establishments to other establishments. Finally, we find larger declines in employment and survival following elections where managers or owners were likely more opposed to the union. This evidence supports new reasons for the negative effects of unionization we document.
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Is Affirmative Action in Employment Still Effective in the 21st Century?
November 2022
Working Paper Number:
CES-22-54
We study Executive Order 11246, an employment-based affirmative action policy tar geted at firms holding contracts with the federal government. We find this policy to be in effective in the 21st century, contrary to the positive effects found in the late 1900s (Miller, 2017). Our novel dataset combines data on federal contract acquisition and enforcement with US linked employer-employee Census data 2000'2014. We employ an event study around firms' acquiring a contract, based on Miller (2017), and find the policy had no ef fect on employment shares or on hiring, for any minority group. Next, we isolate the impact of the affirmative action plan, which is EO 11246's preeminent requirement that applies to firms with contracts over $50,000. Leveraging variation from this threshold in an event study and regression discontinuity design, we find similarly null effects. Last, we show that even randomized audits are not effective, suggesting weak enforcement. Our results highlight the importance of the recent budget increase for the enforcement agency, as well as recent policies enacted to improve compliance
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WHO DO UNIONS TARGET? UNIONIZATION OVER THE LIFE-CYCLE OF U.S. BUSINESSES
February 2014
Working Paper Number:
CES-14-09R
What type of businesses do unions target for organizing and when? A dynamic model of the union organizing process is constructed to answer this question. A union monitors establishments in an industry to learn about their productivity, and decides which ones to organize and when. An establishment becomes unionized if the union targets it for organizing and wins the union certification election. The model predicts two main selection effects: unions target larger and more productive establishments early in their life-cycles, and among the establishments targeted, unions are more likely to win elections in smaller and less productive ones. These predictions find support in union certification elections data for 1977-2007 matched with data on establishment characteristics.
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Older and Slower: The Startup Deficit's Lasting Effects on Aggregate Productivity Growth
June 2018
Working Paper Number:
CES-18-29
We investigate the link between declining firm entry, aging incumbent firms and sluggish U.S. productivity growth. We provide a dynamic decomposition framework to characterize the contributions to industry productivity growth across the firm age distribution and apply this framework to the newly developed Revenue-enhanced Longitudinal Business Database (ReLBD). Overall, several key findings emerge: (i) the relationship between firm age and productivity growth is downward sloping and convex; (ii) the magnitudes are substantial and significant but fade quickly, with nearly 2/3 of the effect disappearing after five years and nearly the entire effect disappearing after ten; (iii) the higher productivity growth of young firms is driven nearly exclusively by the forces of selection and reallocation. Our results suggest a cumulative drag on aggregate productivity of 3.1% since 1980. Using an instrumental variables strategy we find a consistent pattern across states/MSAs in the U.S. The patterns are broadly consistent with a standard model of firm dynamics with monopolistic competition.
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Evidence for the Effects of Mergers on Market Power and Efficiency
January 2016
Working Paper Number:
CES-16-43
Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using confidential data from the U.S. Census Bureau. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to
address the endogeneity of firms' merger decisions.
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Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants
October 2005
Working Paper Number:
CES-05-19
This paper examines the role of international trade in the reallocation of U.S. manufacturing within and across industries from 1977 to 1997. Motivated by the factor proportions framework, we introduce a new measure of industry exposure to international trade that focuses on where imports originate rather than on their overall level. We find that plant survival and growth are negatively associated with industry exposure to low-wage country imports. Within industries, we show that manufacturing activity is disproportionately reallocated towards capital-intensive plants. Finally, we provide the first evidence that firms adjust their product mix in response to trade pressures. Plants are more likely to switch industries when exposure to low-wage countries is high.
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Abandoning the Sinking Ship: The Composition of Worker Flows Prior to Displacement
August 2002
Working Paper Number:
tp-2002-11
declines experienced by workers several years before displacement occurs. Little attention, however,
has been paid to other changes in compensation and employment in firms prior to the actual
displacement event. This paper examines changes in the composition of job and worker flows
before displacement, and compares the "quality" distribution of workers leaving distressed firms to
that of all movers in general.
More specifically, we exploit a unique dataset that contains observations on all workers over
an extended period of time in a number of US states, combined with survey data, to decompose
different jobflow statistics according to skill group and number of periods before displacement.
Furthermore, we use quantile regression techniques to analyze changes in the skill profile of workers
leaving distressed firms. Throughout the paper, our measure for worker skill is derived from
person fixed effects estimated using the wage regression techniques pioneered by Abowd, Kramarz,
and Margolis (1999) in conjunction with the standard specification for displaced worker studies
(Jacobson, LaLonde, and Sullivan 1993).
We find that there are significant changes to all measures of job and worker flows prior to
displacement. In particular, churning rates increase for all skill groups, but retention rates drop
for high-skilled workers. The quantile regressions reveal a right-shift in the distribution of worker
quality at the time of displacement as compared to average firm exit flows. In the periods prior
to displacement, the patterns are consistent with both discouraged high-skilled workers leaving the
firm, and management actions to layoff low-skilled workers.
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Outsourcing Dynamism
December 2023
Working Paper Number:
CES-23-64
This paper investigates the increasing importance of domestic outsourcing in U.S. manufacturing. Under domestic outsourcing, the agency is the employer of record for temporary workers, though they perform their tasks at the client business' premises. On a yearly basis, one in two manufacturing plants hires at least some of its workers through a temporary help agency. Furthermore, domestic outsourcing is becoming increasingly more important: the average share of revenue spent on such arrangements has gone up by 85 percent since 2006. We develop a methodology to transform reported expenses on temporary and leased workers into plant-level outsourced employment counts, using administrative data on the U.S. manufacturing sector. We find that domestic outsourcing is an important margin of adjustment that plants use to modify their workforce in response to productivity shocks. Plant-level outsourced employment adjusts more quickly and is twice as responsive as payroll employment. These micro implications have significant aggregate consequences. Without taking reallocations in outsourced employment into account, the measured pace at which jobs reallocate across workplaces is underestimated. On average, we omit the equivalent of 15 percent of payroll employment reallocations in each year. However, outsourced employment churns at a much higher rate compared to its payroll counterpart. Therefore, the omission of outsourced reallocations can rationalize 37 percent of the secular decline in the aggregate job reallocation rate. Lastly, the extent of mismeasurement varies with the business cycle; falling in downturns and increasing in upturns implying that the speed of economic recovery is underestimated.
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Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement Error-Corrected Regression Discontinuity Approach
March 2016
Working Paper Number:
carra-2016-01
The extension of Unemployment Insurance (UI) benefits was a key policy response to the Great Recession. However, these benefit extensions may have had detrimental labor market effects. While evidence on the individual labor supply response indicates small effects on unemployment, recent work by Hagedorn et al. (2015) uses a county border pair identification strategy to find that the total effects inclusive of effects on labor demand are substantially larger. By focusing on variation within border county pairs, this identification strategy requires counties in the pairs to be similar in terms of unobservable factors. We explore this assumption using an alternative regression discontinuity approach that controls for changes in unobservables by distance to the border. To do so, we must account for measurement error induced by using county-level aggregates. These new results provide no evidence of a large change in unemployment induced by differences in UI generosity across state boundaries. Further analysis suggests that individuals respond to UI benefit differences across boundaries by targeting job search in high-benefit states, thereby raising concerns of treatment spillovers in this setting. Taken together, these two results suggest that the effect of UI benefit extensions on unemployment remains an open question.
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Firm Structure, Multinationals, and Manufacturing Plant Deaths
October 2005
Working Paper Number:
CES-05-18
Plant shutdowns shape industry and aggregate productivity paths and play a major role in the dynamics of employment and industrial restructuring. Plant closures in the U.S. manufacturing sector account for more than half of gross job destruction. While multi-plant firms and multinationals dominate U.S. manufacturing, theoretical and empirical work has largely ignored the role of firms in the plant shutdown decision. This paper examines the effects of firm structure on manufacturing plant closures. Using U.S. data, we find that plants belonging to multi-plant firms are less likely to exit. Similarly, plants owned by U.S. multinationals are less likely to close. However, the superior survival chances are due to the characteristics of the plants themselves rather than the nature of the firms. Controlling for plant and industry attributes that reduce the probability of death, we find that plants owned by multi-unit firms and U.S. multinationals are much more likely to close. A recent change in ownership also increases the chances that a plant will be closed.
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Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms
February 2020
Working Paper Number:
CES-20-06
This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available.
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