The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies

Sudheer Chava; András Danis; Alex Hsu

doi:10.1016/j.jfineco.2020.02.005

The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies

Sudheer Chava, András Danis^*, Alex Hsu

^*Corresponding author for this work

Scheller College of Business

Research output: Contribution to journal › Article › peer-review

Abstract (may include machine translation)

We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.

Original language	English
Pages (from-to)	451-469
Number of pages	19
Journal	Journal of Financial Economics
Volume	137
Issue number	2
DOIs	https://doi.org/10.1016/j.jfineco.2020.02.005
State	Published - Aug 2020
Externally published	Yes

Keywords

Collective bargaining
Investment
Right to work
Unions
Wage growth

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10.1016/j.jfineco.2020.02.005

Cite this

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title = "The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies",

abstract = "We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.",

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N2 - We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.

AB - We analyze the economic and financial impact of right-to-work (RTW) laws in the US. Using data from collective bargaining agreements, we show that there is a decrease in wages for unionized workers after RTW laws. Firms increase investment and employment but reduce financial leverage. Labor-intensive firms experience higher profits and labor-to-asset ratios. Dividends and executive compensation also increase post-RTW. Our results are consistent with a canonical theory of the firm augmented with an exogenous bargaining power of labor and suggest that RTW laws impact corporate policies by decreasing that bargaining power.

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KW - Investment

KW - Right to work

KW - Unions

KW - Wage growth

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ER -

The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies

Abstract (may include machine translation)

Keywords

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