TITLE:
Trade Liberalization, Import Penetration and Unionization: The U.S. Experience
AUTHORS:
Ayfer Gurun, G. Geoffrey Booth
KEYWORDS:
Imports, Unions, Employment, Trade Agreements, Tariffs
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.1,
February
5,
2016
ABSTRACT: In the aftermath of
World War II there has been a worldwide trend for countries to pursue policies
to enhance free trade in order to improve their economic wellbeing.
Nevertheless the benefits are associated with free trade and many generate
unwanted consequences to segments of a nation’s populace. With this thought in
mind, we investigate the impact of import penetration originating from low-wage
countries on the unionization rates in U.S. We find that import penetration
originating from low-wage countries decreases unionization rates, with a 1%
increase in import penetration reducing unionization rates by slightly less
than 2% within three years after controlling for several factors that may
affect unionization rates. If only imports from China and India (both low-wage
countries) are considered, the reduction almost doubles. Our findings are
consistent with the argument that firms are reluctant to collaborate and
contract with unions that ask for sticky labor costs and multiyear contracts
because these provisions often result in declining profit margins.