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Review of Law & Economics

Editor-in-Chief: Parisi, Francesco

Ed. by Cooter, Robert D. / Gómez Pomar, Fernando / Jacobi, Tonja / Kornhauser, Lewis A. / Ulen, Thomas

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The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach

Lonnie K Stevans1

1Hofstra University,

Citation Information: Review of Law & Economics. Volume 5, Issue 1, Pages 595–614, ISSN (Online) 1555-5879, DOI: 10.2202/1555-5879.1352, October 2009

Publication History

Published Online:
2009-10-16

A state’s right to prohibit unions from compelling employees to pay dues even when they are covered by a collective bargaining agreement has its basis in the 1947 Taft-Hartley amendments to the National Labor Relations Act (1935). After the amendment's passage, twelve states passed “right-to-work” laws--as did ten more states in the intervening years. Although there has been considerable research on the effect of right-to-work laws on union density, organizing efforts, industrial development and some study of wage differences, there has been little or no examination of the legislation’s influence on business and economic conditions across states. In this paper, the average differences in business conditions, employment, personal income, wages and salaries, and proprietors’ income across states that have enacted right-to-work laws versus those states that did not, are examined assuming that the legislation is endogenous and controlling for state real economic growth, region, and year. Although right-to-work states may be more attractive to business, this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little “trickle-down” from business owners to the non-unionized workers. While the number of self-employed is higher and business bankruptcies lower on average in right-to-work states, there is no significant difference in capital formation or employment rates, ceteris paribus. In addition, per-capita personal income and wages are both lower, yet proprietors’ income is higher in right-to-work states.

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