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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Investment and Union Certification
Bruce C. Fallick and Kevin A. Hassett

Abstract: A growing body of work--both theoretical and empirical--has emphasized that unionization may be better understood as a tax on capital rather than a tax on labor. Under this "new" view, unionization unambiguously lowers investment. Using data on union certification elections, we estimate the impact of unionization on firms' investment behavior. Employing both a standard q-model and an "investment surprises" technique, we find that union certification significantly reduces investment. We find that a winning certification election has, on average, about the same effect on investment as would a 30 percentage point increase in the corporate tax.

Keywords: Investment, union

Full paper (145 KB PDF) | Full paper (283 KB Postscript)

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Last update: July 16, 1997