INDUCED INEFFICIENCY AS A RESPONSE TO THE UNION THREAT

Milkman and Mitchell (1995) extend Rosen's (1969) threat-effect hypoth esis to suggest that the threat of unionization can induce inefficient underutilization of labor by nonunion firms. if films follow this str ategy, the apparent paradox of competitive coexistence in the face of higher union wages reflects induced nonunion firm inefficiency rather than superior union firm efficiency. Furthermore, this strategy decrea ses demand for nonunion workers in a partially unionized industry A ge neralized cost function analysis of data from sawmills in the Pacific Northwest yields evidence that nonunion firms use this strategy.