The effect of unions on labor markets and economic growth: An analysis of state data

Despite voluminous research on unions, there still is no consensus on how u nions affect a state's economy. Using a panel of 48 U.S. states for the 197 8-1994 period we estimate a series of simultaneous equations to analyze how unions affect various economic barometers. This provides measures for the partial correlations between unions and performance. The model is then re-e stimated using regional dummies to capture fixed effects and to highlight r egional differences in the slope of the Phillips curve. We find that unions adversely affect unemployment rates and the growth rates of gross state pr oduct (GSP), productivity: and population, while increasing the rate of wag e inflation. The impact on the employment growth rate is negative but not s ignificant. A test for fixed effects reveals regional differences in GSP gr owth. Regional differences in population grow th are not significant. Also, the slope of the phillips curve is significantly different across regions.