The Productivity Puzzle and the Decline of Unions

Research output: Contribution to journalArticlepeer-review

Abstract

This paper finds that rapid de-unionization can explain the sudden vanishing of the procyclicality of productivity in the U.S. during the 1980s, a phenomenon dubbed the ‘productivity puzzle’. Cross-sectional evidence from U.S. states and industries shows that a decline in union power led to a decrease in the cost of hiring and firing workers, which prompted firms to rely less on labor hoarding, making productivity less procyclical. In a model with endogenous worker effort, a decrease in employment adjustment cost by the amount implied by de-unionization explains a significant part of the observed decline in the procyclicality of productivity.
Original languageEnglish
Article number104806
Number of pages19
JournalJournal of Economic Dynamics and Control
Volume159
Early online date29 Dec 2023
DOIs
Publication statusPublished - 1 Feb 2024

Keywords

  • labour productivity
  • unions
  • hiring cost
  • factor utilization
  • DSGE model

Fingerprint

Dive into the research topics of 'The Productivity Puzzle and the Decline of Unions'. Together they form a unique fingerprint.

Cite this