Do public sector unions erode business climates?

Abstract

This article addresses whether the growing prevalence of public sector unions exerts effects that spill over to the private sector. The hypothesis that higher prevalence erodes business climate is tested on an index of CEO ratings of the best and worst states in which to conduct business. Evidence indicates that business climates are inversely related to public sector union prevalence. An implication is that erosion of business climates should be a concern to union members as well since they rely on businesses, their employees and customers to pay for government.

Keywords:

• public unions
• business climate
• government size
• bureaucracy

JEL Classification:

• H11
• H73
• J45

Notes

¹ Unless otherwise stated, data obtained from the Centers for Disease Control and Prevention (CDC) Behavioral Risk Factor Surveillance System (BFRSS) survey available at http://apps.nccd.cdc.gov/brfss/

² Data are obtained from the Centers for Disease Control and Prevention (CDC) Behavioral Risk Factor Surveillance System (BFRSS) survey available at http://apps.nccd.cdc.gov/brfss/.

³ Regressions were run with and without regional dummy variables to determine whether they were connected to public sector unions or numbers of government employees. Results did not vary and so are left in the regressions.

⁴ Data obtained from US Census at http://www.census.gov/govs/

⁵ Another set of regressions were run using an interactive term that multiplied them together, but results are not displayed here since coefficients were not statistically different from zero.