Outsourcing and Unionization: A Tale of Misallocated (Resistance) Resources

23 Pages Posted: 29 Mar 2010

See all articles by Lisa Magnani

Lisa Magnani

Macquarie University, Macquarie Business School

David Prentice

Infrastructure Victoria


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 Classification: J5, L2, L6

Suggested Citation

Magnani, Lisa and Prentice, David, Outsourcing and Unionization: A Tale of Misallocated (Resistance) Resources. Economic Inquiry, Vol. 48, No. 2, pp. 460-482, April 2010, Available at SSRN: https://ssrn.com/abstract=1578521 or http://dx.doi.org/10.1111/j.1465-7295.2009.00223.x

Lisa Magnani (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109

David Prentice

Infrastructure Victoria ( email )

530 Collins St
Melbourne, 3000

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