Webber, Anthony and Knight, Warren B., Union density and industry output, dynamic and long run responses: the case of the Australian building and construction industry, Department of Economics, University of Wollongong, Working Paper 96-12, 1996, 28.
This paper examines the effect on industry output of union density both conceptually and empirically in the case of the Australian Building and Construction industry. The classical view of the effects of a heavily unionised industry is that by exhibiting some market power, unions are able to extract above normal rents and cause industrial disruption, which is reflected in lower industry employment and higher wages. More contemporary beliefs describing the effect of unions concentrates on issues related to the external information benefits provided by union movements. By voicing information related to exit, it is argued that the resulting lower labour turnover and other related costs dominate possible higher wage and lower employment outcomes supposedly generated by heavily unionised sectors. Empirical evidence from Australia in the case of the heavily unionised Building and Construction industry, does not support the classical view that higher union density inhibits the output performance of the industry in the long run. The estimates also reveal a quick path to long run equilibrium.