Unionisation, short-run flexibility and cost efficiency: Evidence from U.S. manufacturing.

Flexibility is of great interest to policy makers and in the popular policy debate, unions are believed to be a main impediment to achieving it. However, these beliefs are not based on firm empirical foundations. Using a new dataset on U.S. three digit manufacturing industries from 1971 - 1994, we quantify, for the first time, Stigler's concept of output flexibility, estimate input flexibility and quantify the effects of unionisation on both. We find that on average unionisation reduces input flexibility by about 50%, raises average costs by about 3% but reduces output flexibility by just 0.35%.