OUTSOURCING AND UNIONIZATION: A TALE OF MISALLOCATED (RESISTANCE) RESOURCES

Authors

  • ELISABETTA MAGNANI,

    1. Magnani: Associate Professor, School of Economics, The University of New South Wales, Australian School of Business Building, UNSW Sydney NSW 2052, Australia. Phone 61 2 9385 3370, Fax 61 2 9313 6337, E-mail e.magnani@unsw.edu.au
    Search for more papers by this author
  • DAVID PRENTICE

    1. Prentice: Senior Lecturer, School of Economics and Finance, School of Business, La Trobe University, VIC, 3086, Australia. Phone 61 3 9479 1482, Fax 61 3 9479 1654, E-mail d.prentice@latrobe.edu.au
    Search for more papers by this author
    • *

      The authors wish to thank participants at the international workshop “Institutions and the Labor Market” organized by ZEW—Centre for European Economic Research, Mannheim, March 30–31, 2007, as well as participants at the XV AISSEC Conference Program November 2006 for helpful comments on previous versions of this article. Thanks also to two anonymous referees for very useful comments.


Abstract

While many believe the growth in outsourcing contributed to the decline in U.S. unionization up to the 1990s, this argument has never been investigated systematically. In this article, we analyze the effect of outsourcing on unionization between 1973 and 1993. Instrumental variables estimation shows outsourcing contributes to higher quasirents and industry productivity. We find the union wage premium increases with the extent of outsourcing—both for workers that are substitutable by outsourcing services and workers in jobs that are not substitutes of the tasks being outsourced. Finally, we find no support for the claim that outsourcing reduces unionization. (JEL J5, L2, L6)

Ancillary