ARE UNION PRODUCTIVITY EFFECTS OVERESTIMATED - EVIDENCE FROM COAL-MINING

The empirical literature of the influence of unions on productivity is extended by considering the effect in an industry with heterogeneous firms. Recent theoretical papers suggest that, in such an industry, un ions will tend to organize the exogenously 'more productive' firms. Th us, a spurious correlation between unions and productivity may emerge. We test this hypothesis by estimating production functions for coal w ith data from Eastern Kentucky underground coal mines. The aspect of m ine heterogeneity that we focus on is the width of the mine's seam of coal. Wider seams increase productivity. Empirically, we find that uni ons disproportionately organize mines with wider seams and this accoun ts for the positive relationship between unions and productivity obser ved in our data. In fact, once seam thickness is accounted for, the es timated effect of unions on productivity is negative.