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Testing the Monopoly Union Model: A Stochastic Frontier Approach
Author(s) -
SWANSON JAMES,
ANDREWS KIM
Publication year - 2007
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/j.1468-232x.2007.00497.x
Subject(s) - inefficiency , monopoly , frontier , economics , stochastic frontier analysis , econometrics , manufacturing sector , microeconomics , stochastic modelling , labour economics , production (economics) , finance , archaeology , history
This study applies stochastic frontier analysis to test the monopoly union model. This approach allows the use of a wider data set than has been previously employed. We fit a stochastic cost frontier to data from the U.S. manufacturing sector that includes exogenous sources of potential inefficiency including unionization. Our findings suggest that over the 1972–1982 time period, more heavily unionized industries in the U.S. manufacturing sector were more likely to operate off their labor demand curve. This result is inconsistent with the monopoly union model predictions.