Do Unions Cause Business Failures?

Estimating the causal effect of unionization on business survival rates is difficult in the absence of large, representative data on establishments with union status information. It is also confounded by selection bias, because unions may tend to organize at highly profitable enterprises that are more likely to survive. Using new data on more than 27,000 establishments that faced organizing drives in the U.S. during 1983-1999, this paper utilizes a regression discontinuity design to estimate the impact of unionization on the probability of employer dislocation. Survival probabilities of employers where unions barely won the election (e.g. by one vote) are compared to those where the unions barely lost. The analysis yields a surprising result: little or no union effect on business dislocation rates over 1to 18-year horizons. * An earlier version of the paper “The Impact of Unionization on Establishment Closure: A Regression Discontinuity Analysis of Representation Elections” is on-line as NBER Working Paper #8993, June 2002. We thank David Card, Larry Katz, Enrico Moretti, Morris Kleiner, participants of the University of Michigan Labor Workshop and the NBER Labor Studies Summer Institute for helpful comments and suggestions, Matthew Butler and Francisco Martorell for outstanding research assistance, Hank Farber for providing election data, and Christina Lee for reading previous drafts.