Do unions make enterprises insolvent?

This study investigates the impact of unionization on closures of firms, bu siness lines, and establishments. Analyzing data from two major data sets-o ne (from the COMPUSTAT files) on the union status of solvent and insolvent enterprises and business lines, and one (obtained by matching files from th e Current Population Survey) on the union status of workers who have lost t heir jobs due to permanent plant closures or business failures-the authors find little support for the hypothesis that unionization increases the inso lvency of firms. The results are consistent with the hypothesis that unions behave in an economically rational manner, pushing wages to the point wher e union firms may expand less rapidly than nonunion firms, but not to the p oint where the firm, plant, or business line closes down.