Unionization and Input Flexibility in U.S. Manufacturing,1973 – 1996

Abstract

Input flexibility, as measured by the ability of firms to vary input demand in the face of changes in input prices, is an important dimension of labor market flexibility. Using a new dataset, the authors analyze the impact of unionization on input flexibility in U.S. manufacturing from 1973 to 1996, a period in which production was arguably becoming more flexible due to deep changes in the U.S. industrial relations system and in the broad macroeconomic environment. The authors quantify the effects of unionization on input flexibility by estimating elasticities of substitution between a broad range of labor and non-labor inputs, controlling for unionization. The pattern that emerges is more complex than that suggested by other research. In particular, low unionization apparently is associated with greater flexibility in the use of labor inputs but less flexibility in the use of non-labor inputs.