what has happened to union recognition in britain this paper examines the determinants of establishment level union recognition status using data from the three workplace industrial relations surveys of 1980 1984 and 1990 our theoretical approach argues that product and labour market variables dated at or around the establishment s setup should be considered the crucial determinants of recognition status confirmation of these predictions is found for private sector manufacturing establishments in the econometric analysis of particular interest are i the nonlinear relationship between historic industry quasi rents and recognition status and the stability of this aspect of the model over the three data sets and ii a marked downward shift in recognition probabilities that occurred during the 1980s which seems to be largely a consequence of the failure to organize new establishments set up in the 1980s

accounting rates of return many economic studies provide empirical evidence regarding cross sectional differences in firm profitability in most of these studies firm profitability is measured by an accounting rate of return net income dividend by the book value of assets hereafter arr rather than an economic rate of profit franklin fisher and john mcgowan define the firm s economic rate of profit irr as that interest rate which equates the present value of its net revenue stream to its initial outlay 1983 p 82 fisher and mcgowan examine the analytic relation between a firm s arr and its irr in a series of examples and conclude that the arr is such a bad surrogate for the irr that the results of arr based empirical studies are likely to be totally misleading p 91 william long and david ravenscraft 1984 have criticized the theoretical work of fisher and mcgowan because the nature of the analytic relationship between the arr and the irr in the context of highly simplified hypothetical examples may not be indicative of the nature of the relationship in empirical settings their criticism adopts the utilitarian view that the arr has to be treated as a suitable surrogate for the irr as long as no preferable alternative measure of profitability is available for empirical work this view has merit as long as the measurement error which is contained in the arr is random rather than systematic unfortunately the nature and extent of the measurement error which is contained in the arr in a particular empirical setting can only be determined unequivocally if the irr is unequivocally known in such a case of course there would be no need to rely on the arr at all due to this unhappy circle empirical research on firm profitability has continued to rely on the arr despite the fact that many persons reasonably believe that the results of such research may be totally misleading fisher and mcgowan g c harcourt 1965 while others reasonably believe that the results are reliable enough to form a basis for policy decisions long and ravenscraft recent work by y ijiri 1978 1979 1980 and by myself 1982 has shown that conditional irr estimates can be obtained from data in firms financial statements while these irr estimates are conditional they do abstract from certain extraneous factors that influence arrs and that differ across firms consequently the conditional irr estimates are free from some of the sources of measurement error which are known to contaminate the arr thus the conditional irr estimates can be used to provide evidence on whether these sources of measurement error have or have not affected the outcome of prior studies in which profitability was measured by the arr such evidence can help to objectively resolve the conflict between the opposing views on the reliability of arr based profitability research this paper uses conditional irr estimates to examine the properties of the measurement error in the arr in a study of the relationship between firm profitability and firm size the remainder of the paper is organized as follows in section i the theoretical work of fisher and mcgowan is used professor of accounting university of iowa iowa city ia 52242 i gratefully acknowledge the comments of william albrecht dan dhaliwal gary fethke franklin fisher scott linn william r kinney jr and the participants of a workshop at the university of florida on earlier versions of this paper 1 some authors for example william long and david ravenscraft 1984 have used the sales margin ratio earnings sales as a measure of profitability however if one views profitability as return per unit of sacrifice the sales margin ratio is not a profitability measure since it ignores the sacrifice or investment required to generate a dollar of sales consequently this paper does not attempt to shed any insight into prior studies that have relied on the sales margin ratio as a measure of profitability

collective agreements wages and firms cohorts evidence from central europe using a large matched employer employee data set the authors investigate the impact of company and industry collective bargaining agreements on wages in the czech republic hungary and poland ce3 they also examine the changing characteristics of the union wage premium in different cohorts of establishments their results challenge the common idea of weak unions in the ce3 by revealing a union wage premium whose characteristics depend on the level at which collective bargaining occurs they find that industry agreements increase wages for low skilled workers while company agreements increase medium and high skilled wages their second finding is that the union wage premium is unevenly distributed between cohorts with substantial cross country variation wage premiums are concentrated in the transitional cohorts in the czech republic and poland and to a lesser extent in the pre transitional cohort in hungary

motivating devoted workers abstract when increased effort by a worker induces an employer to reduce its use of other inputs inefficiency may result in particular suppose that output increases with the worker s effort that a worker exerts extra effort because he values the output produced beyond the wage he earns that output increases with the capital the employer provides and that these levels are not verifiable under plausible conditions output is lower if the employer can commit to a level of capital than if it cannot if the employer cannot commit then output may decline as the worker values the output more when the employer pays the worker for increased output output may be lower when the worker values it than when he does not lastly efficiency may increase when a firm is paid more for a unit of output than its marginal social value and when the employer can commit to using a given level of other inputs

unions and monopoly profits using cross sectional data for u s manufacturing the author identifies a negative effect of unions on the profits of highly concentrated industries and virtually no effect on the profits of unconcentrated industries the results for concentrated industries are explained in terms of the monopoly model which predicts a negative effect of unions on profits equivalent to the change in employer s surplus the monopoly model also suggests that previous profit studies which omitted the union variable were likely to significantly underestimate the relationship between concentration and profits this prediction is also supported by empirical evidence m sany studies have demonstrated the ability of unions to raise wages above the level of nonunion workers higher union wages in turn may affect the level of prices employment capital intensity productivity and profits recent studies by clark 1982 and freeman 1983 have found significant negative effects of unions on profit rates in the united states using line of business data from 1970 to 1980 for 900 firms clark found a negative effect of unions on the rate of return to capital more specifically the union effects were found to be significantly negative when market shares were low and insignificant when market shares were high according to clark the absence of a union effect in the latter case can be explained by the ability of firms with market power to pass on higher union wages into higher prices 1982 p 47 on the other hand freeman 1983 using data from the survey of manufactures from 1958 to 1976 and the internal revenue service from 1965 to 1976 also found a negative effect of unions on profits contrary to clark s results however the union profit effect was negative only in concentrated industries the point of contention appears to be the role of concentration in determining the union profit effect rather than the overall negative impact of unions the results of clark and freeman are important because previous industrial organization research on profit rates generally ignored unions for instance of the forty six profit studies surveyed by weiss 1974 none included a union variable more recently a profit study in this review by ravenscraft 1983 using high quality line of business data from the federal trade commission also ignored unionization as will be demonstrated the omission of the union variable leads to an understatement of the effect of industrial concentration on profits this means that concentrated industries generate much greater profits than indicated by previous research in order to measure the size of the understatement a new concept employer s surplus is developed which illustrates the theoretical impact of a union wage increase on monopoly profits the empirical estimates of employer s surplus in this paper indicate how monopoly profits are divided between firms and unions most of the data used in this study were obtained from james medoff and charles brown 2 unlike the previous two studies each observation corresponds to a state by two digit sic industry for manufacturing in 1972 because of the large variations in unionization across states this data set offers a useful test of the union profit effect i employer s surplus according to accepted theory the profit maximizing monopolist will employ labor up to the point where the market wage equals the marginal revenue product mrp 3 if for simplicity we assume that all other factors are variable then the mrp curve represents the monopolist s long run demand for labor in the absence of unions employment is determined by the intersection of the mrp curve and nonunion wage wn as pictured in figure 1 if unions raise wages to wa employment will decrease from ln to l with the reducreceived for publication november 28 1983 revision accepted for publication july 6 1984 eastern washington university i am very grateful to dave bunting lisa brown bill dickens claire brown and george strauss for their valuable suggestions on this research this paper is a revised version of chapter 3 from the author s ph d thesis the union impact on profits productivity and prices university of california berkeley 1 see parseley 1980 for a recent review of this literature 2 i would like to thank brown and medoff for making these data available to me 3 marginal revenue product is equal to marginal revenue multiplied by marginal physical product see rees 1979

the effects of unions on organisational change and employment this paper investigates the association between unionism organizational change and employment using british data over 1980 84 union plants were more likely to have experienced organizational change this is likely to be due to both the once for all removal of restrictive practices and union voice effects the oft cited negative relationship between unionism and employment growth may well arise from the differential extent to which restrictive practices were removed in union plants during 1980 84 more importantly the authors present evidence suggesting that unions were associated with faster employment growth during the late 1970s copyright 1991 by royal economic society

the contracting benefits of accounting conservatism to lenders and borrowers abstract this paper examines the ex post and ex ante benefits of accounting conservatism to lenders and borrowers in the debt contracting process i expect conservatism to benefit lenders ex post through the timely signaling of default risk as manifested by accelerated covenant violations and to benefit borrowers ex ante through lower initial interest rates consistent with these predictions i find that more conservative borrowers are more likely to violate debt covenants following a negative price shock and that lenders offer lower interest rates to more conservative borrowers

british unions in decline determinants of the 1980s fall in union recognition this examination of establishment level data from the workplace industrial relations surveys of 1980 1984 and 1990 shows that the proportion of british establishments that is workplaces in both the private and public sector that recognized unions for collective bargaining over pay and working conditions fell by almost 20 between 1980 and 1990 largely accountable for this decline was a much lower rate of union recognition in establishments founded in the 1980s than in previous years particularly in the private sector citing these findings as well as recent structural changes in employment in the british labor market such as the shift from manufacturing to services from manual to non manual employment and from full time to part time work and a government that continues to enact anti union legislation the authors foresee no reversal of unions decline in the 1990s

firm level contracting and the structure of wages in spain in many european countries sectoral bargaining agreements are automatically extended to cover all firms in an industry employers and employees can also negotiate firm specific contracts the authors of this paper use a large matched employer employee data set from a 1995 survey in spain to study the effects of firm level contracting on the structure of wages they estimate a series of wage determination models including specifications that control for individual characteristics coworker characteristics the bargaining status of the workplace and the probability that the workplace was covered by a firm level contract they find that firm level contracting was associated with a 5 10 wage premium with larger premiums for more highly paid workers although they cannot decisively test between alternative explanations for the firm level contracting premium they find that workers with firm specific contracts had substantially longer job tenure than other workers suggesting that the premium was at least

union status of young men in britain a decade of change previous empirical studies of individual union status in britain have been cross sectional in contrast we use longitudinal data from the national child development study to estimate the determinants of male trade union membership over the period 1981 1991 as suggested by union theories we find that it is important to control for unobserved individual heterogeneity and our preferred model allows for correlation of individual heterogeneity with observable variables our estimates reveal that the observed decline in very large workplaces and the contraction of the public sector explain about one third of the predicted decline in union membership over the period

union wage differentials product market influences and the division of rents this paper examines the extent to which product market conditions limit the ability of trade unions to establish wage differentials over nonunion pay the mean union pay differential is estimated to be of the order of 8 percent to 10 percent in establishments with some degree of product market power but zero in establishments facing competitive product market conditions when competitive conditions are faced a preentry closed shop and high union coverage of the industry are both required it is estimated that only 5 percent of the establishments in which there are significant differentials over nonunion pay face generally competitive product market conditions copyright 1990 by royal economic society

the economic role of a work ethic abstract this paper explores the extent to which a cultural work ethic can improve the performance of an economy it argues that a variety of technological and institutional features of labor markets tend to cause pareto sub optimal amounts of labor to be supplied to the economic nexus as a consequence a proper work ethic can improve economic efficiency as well as material well being a man does not by nature wish to earn more and more money but simply to live as he is accustomed to live and to earn as much as is necessary for that purpose wherever modern capitalism has begun its work of increasing the productivity of human labor by increasing its intensity it has encountered this leading trait of pre capitalistic labor max weber the protestant ethic and the spirit of capitalism 1904 1984 p 60 sacred to the city however is the work ethic office workers think nothing of leaving for work at 6a m and staying on to 9 or 10 at night that rather than economic management is the explanation for the brazilian miracle of the past 40 years the economist april 25 1987 p 22 1

conditionally conservative fair value measurements abstract firms measure fair values using level 2 or 3 inputs when items do not trade in liquid markets limiting market discipline over the measurements we provide evidence that firms holding higher proportions of financial instruments measured at level 2 and 3 fair values report more conditionally conservative comprehensive income attributable to fair value measurements consistent with firms trying to mitigate investors discounting of the measurements we further predict and find that this conditional conservatism 1 increases with governance mechanisms that increase the strength and persistence of firms incentives to report conservatively and 2 decreases with firms earnings management incentives

accounting for the decline in union membership 1950 1980 this study analyzes the components of the post 1950 trends in the share of the private work force organized by unions which rose from 1950 to 1954 and then fell steadily to 1980 the authors decompose the sources of growth and decline into changes in organizing activity success in certification elections losses from decertification elections and net growth due to economic causes the last a residual measure designed to capture the effect of factors such as plant closings layoffs and new hires they find that all factors except decertifications accounted for a substantial part of the decline since 1954 when the level of aggregate economic activity is held constant loss of membership due to other economic causes shows no downward trend a finding that challenges the view that the decline in the unionized share of the work force has been due primarily to a secular decline in employment in the strongly unionized industries

the effect of firm level contracts on the structure of wages evidence from matched employer employee data in spain as in several other european countries sectoral bargaining agreements are automatically extended to cover all firms in an industry employers and employees can also negotiate firm specific contracts we use a large matched employer employee data set to study the effects of firm level contracting on the structure of wages employees covered by firm specific contracts earn about 10 percent more than those covered by sectoral contracts the estimated premium is about the same for men in different skill groups but higher for more highly skilled women suggesting that firm level contracts raise wage inequality for women at the establishment level we compare average wages under firm level and sectoral bargaining controlling for the propensity to negotiate a firm specific contract consistent with the worker level models we find that firm specific contracting raises average wages with a pattern of effects that tends to increase inequality relative to sectoral bargaining for women although we cannot decisively test between alternative explanations for the firm level contracting premium workers with firm specific contracts have significantly longer job tenure suggesting that the premium is at least partially a non competitive phenomenon

the rise of the modern welfare state ideology institutions and income security analysis and evidence in the 25 year period between 1960 and 1985 there was a great expansion of welfare state programs throughout the west the fraction of gdp accounted for by social expenditures doubled in much of europe and grew by 40 50 in many other oecd nations after 1985 growth in social insurance programs slowed relative to other parts of the economy this paper explores the extent to which institutions and ideological shifts may have accounted for the period of rapid growth for differences in the extent of that growth and for the subsequent reduction in the growth rates of social insurance programs

efficient status seeking externalities and the evolution of status games abstract status seeking games are games in which an individual s utility is determined by his relative expenditure on status seeking activities rather than his absolute consumption there are a number of parallels between status seeking and rent seeking activities for example a tendency for pareto excessive private investment however many status seeking activities differ from rent seeking activities insofar as they generate significant benefits to individuals not actively involved in the game given an array of more or less productive status seeking games it is likely that relatively efficient status conferring mechanisms will tend to displace less efficient ones

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

social capital and growth we define and characterize social capital in a simple growth model we capture social capital in a model where individuals in a community maximize their lifetime gains to trade each trade between two members of a community has the structure of the prisoners dilemma trades are repeated indefinitely but not necessarily each period social capital is defined as the social structure which facilitates cooperative trade as an equilibrium the trading model is incorporated into a growth model to explore the connections between growth labor mobility and social capital the key assumption is that technological innovation which drives growth involves a reallocation of labor that affects social capital modifying the responsiveness of labor to a technological shock has implications for both labor efficiency and social capital

understanding discretion in conservatism an alternative viewpoint various studies have investigated variation in reporting conservatism with pre specified contractual incentives lawrence et al forthcoming hereafter lss propose a model to control for normal or non discretionary conservatism while testing for variation in conservatism with contractual forces which they characterize as discretionary variation our objective is to further the discussion on discretion in conservatism by relying on lss and incorporating insights from related studies to shed light on the rationales and relative importance of various controls for normal conservatism suggested by lss furthermore our perspective on discretion in conservatism is distinct from the one developed by lss in some crucial respects ultimately leading us to question the nature of the boundary between discretionary and non discretionary conservatism

unions and the capture of economic rents an investigation using british firm level data this paper considers the relationship between unions and profitability in a sample of large british firms in 1984 and 1985 the initial finding is that unionised firms have significantly lower profit margins than otherwise comparable non union firms tests of whether the ability of unions to influence profit margins varies with the product and labour market characteristics of the firms in which they are located are then conducted the ability of unions to capture economic rents is seen to be significantly greater in firms which have a high market share and or operate in highly unionised industries

human resource management as a substitute for trade unions in british workplaces the authors use british workplace data for 1980 98 to examine whether increased human resource management hrm practices coincided with union decline consistent with the hypothesis that such practices act as a substitute for unionization two initial analyses show no important differences between union and non union sectors or between newer workplaces which are likelier to be non union and older ones in the pattern of hrm practices over time and the study s longitudinal analysis picks up no evidence of faster union decline in workplaces or industries that adopted hrm practices than in those that did not not only is the hypothesized substitution effect thus not supported but the authors even uncover some evidence of a complementarity between unions and hrm practices the authors conclude that increased use of hrm practices is probably not an important factor underpinning union decline in britain

the impact of new unionization on wages and working conditions this study investigates the impact of union organization on the wages and labor practices of establishments newly organized in the 1980s it uses a research design in which establishments are paired with their closest nonunion competitor it finds that unionism had only a modest effect on wages in the newly organized plants which contrasts sharply with the huge union wage impact found in cross section comparisons of union and nonunion individuals but unionism substantially alters several personnel practices creating grievance systems greater seniority protection and job bidding and posting that newly organized establishments adopt union working conditions but grant only modest wage increases suggests that collective voice rather than monopoly wage gains is the key to understanding new unionism

help harm or avoid on the personal advantage of dispositions to cooperate and punish in multilateral pd games with exit abstract simulated round robin tournaments are used 1 to assess the relative performance of non defecting conditionally cooperative programs in a three person pd setting where exit is possible pdes and 2 to assess the importance of sanctions for the success of joint enterprises we find that the possibility of exit allows individuals to escape from dysfunctional teams which increases the potential benefits of cooperation while reducing those associated with free riding we also find that punishment especially targeted punishment is critical to the success of shorter term enterprises similar results held in evolutionary settings where successful behavioral programs can be imitated or propagated by non rational biological or social processes our results suggest that non defecting programs of conditional cooperation can be rational average payoff maximizing strategies for participating in small multilateral settings where individuals can choose to participate in a pd game or not

asymmetric timeliness of earnings market to book and conservatism in financial reporting abstract using an accounting conservatism theory that reflects accounting s role in practice we investigate the relation between two extensively used measures of conservatism asymmetric timeliness of earnings and the market to book ratio mtb we predict and observe that when asymmetric timeliness is measured cumulatively over long periods its relation with end of period mtb is positive when asymmetric timeliness is measured over short periods its dependence on beginning of period composition of equity value ev is responsible for its negative association with mtb further asymmetric timeliness appears to measure conservatism more efficiently when it is estimated cumulatively over multiple periods

the validity of profits structure studies with particular reference to the ftc s line of business data the simple proposition that consumerdamaging collusion is more likely to occur when there are fewer competitors has given rise not only to legal restrictions of economic activity thought to restrict output but also to an enormous amount of empirical work attempting to relate market concentration to the exercise of monopoly power most such studies measured market structure by an index of concentration for example four firm concentration or herfindahl and performance by accounting profit for example net profit divided by assets or price cost margins sales less direct costs divided by sales from the positive statistically significant correlations often found between greater concentration and profit with other factors presumably accounted for some researchers conclude that increases in concentration are anticompetitive and that concentration therefore is bad the concentration profits studies have been criticized essentially on two grounds one is that the positive relationship is not indicative of collusive behavior in particular oliver williamson 1968 john mcgee 1971 harold demsetz 1973 1974 and sam peltzman 1977 point out that higher profits could result from efficiencies experienced by large firms which resulted both in greater market shares and high levels of concentration analytical arguments show that higher profits logically follow as much from lower costs that are associated with higher levels of concentration as from collusion determined higher prices some empirical evidence that supports this belief is presented by demsetz peltzman and bradley gale and ben branch 1982 however their findings have been contested on the grounds that the data used are biased or inadequate or that the researchers have not demonstrated that the observed higher profits greater concentration relationship was caused by lower costs 2 the second criticism is that available data provide an inadequate basis for such conclusions the concentration numbers are based usually on industries defined by the commerce department s standard industrial classifications sic the sic definitions tend to be supply production rather than demand determined include nonhomogeneous products and exclude sales of similar products that are included in different sic groups or are imported the profit data are taken from accounting reports that provide poor measures of economic values weiss 1974 describes many of these problems however he does not believe that these shortcomings invalidate the studies as weiss 1979 concludes

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

union relative wage effects a survey of macro estimates this paper surveys union wage effect estimates drawn from empirical cross section wage equations fitted to macro aggregated data in 34 post 1963 studies containing such equations each estimate is the partial derivative of the dependent wage variable in logarithmic units with respect to the extent of unionism fraction unionized variable in the equation this paper shows that these estimates contain a mixture in uncertain ratio of the union nonunion wage differential or wage gap on the one hand and an extent of unionism effect on the other therefore the macro estimates should not be interpreted as wage gap estimates

institutions transaction costs and economic growth this essay develops a theoretical framework which explores the historical obstacles to economic growth these obstacles are examined in the context of the political economic institutional framework of economies in history and consequent transaction costs that determine economic performance and growth the essay concludes with specific suggestions for the study of economic growth

non discretionary conservatism evidence and implications a large body of accounting research finds that various contracting incentives lead managers to engage in conservative accounting practices we extend existing research by modeling the impact of extant accounting rules on conservative accounting accounting rules typically require assets to be written down when their fair values drop sufficiently below their book values we document evidence of the resulting non discretionary conservatism and show that it appears to explain some of the results from previous research on contracting incentives