Substitutability of Capital-Labour in the presence of unions in the US postal services industry

Hazrul Izuan Shahiri, Zulkifly Osman

Research output: Contribution to journalArticle

Abstract

This paper studies the effects of labour unions on elasticity of substitution between production inputs in the US Postal Service industry. The study uses data from the National Income Product Account (NIPA) and the Current Population Survey (CPS). The paper estimates elasticity substitution between production labour, non-production labour, and capital using CES production functions and translog cost function. The CES production function is estimated by using seemingly unrelated non-linear least square regression of inverse labour demand on the union density and input prices. In the translog cost function, seemingly unrelated linear regression is employed to run regression of cost share of operation labour and cost share of non-operation labour on union density and input prices. Further, the paper uses an instrumental variable of union density in the federal sector to solve the endogeneity of the union density. The analysis indicates that the labour union did not reduce elasticity substitution between production inputs. However, the union was able to maintain inelastic substitution between production labour and capital and between non-production labour and capital. The results of this study suggest that the strength of production labour and non-production labour to remain inelastic to substitute with capital was due to low competitive industry.

Original languageEnglish
Pages (from-to)53-71
Number of pages19
JournalInstitutions and Economies
Volume8
Issue number2
Publication statusPublished - 2016

Fingerprint

Substitutability
Postal service
Labor
Service industries
Union density
Substitution
Costs
Labor unions
Elasticity
Translog cost function
CES production function
Input prices
Labour demand
Instrumental variables
Substitute
National income
Endogeneity
Current population survey
Linear regression
Industry

Keywords

  • Demand
  • Elasticity
  • Substitution
  • Translog
  • Union

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

Cite this

Substitutability of Capital-Labour in the presence of unions in the US postal services industry. / Shahiri, Hazrul Izuan; Osman, Zulkifly.

In: Institutions and Economies, Vol. 8, No. 2, 2016, p. 53-71.

Research output: Contribution to journalArticle

@article{8704e065fb914cd9bd9dc234db454a14,
title = "Substitutability of Capital-Labour in the presence of unions in the US postal services industry",
abstract = "This paper studies the effects of labour unions on elasticity of substitution between production inputs in the US Postal Service industry. The study uses data from the National Income Product Account (NIPA) and the Current Population Survey (CPS). The paper estimates elasticity substitution between production labour, non-production labour, and capital using CES production functions and translog cost function. The CES production function is estimated by using seemingly unrelated non-linear least square regression of inverse labour demand on the union density and input prices. In the translog cost function, seemingly unrelated linear regression is employed to run regression of cost share of operation labour and cost share of non-operation labour on union density and input prices. Further, the paper uses an instrumental variable of union density in the federal sector to solve the endogeneity of the union density. The analysis indicates that the labour union did not reduce elasticity substitution between production inputs. However, the union was able to maintain inelastic substitution between production labour and capital and between non-production labour and capital. The results of this study suggest that the strength of production labour and non-production labour to remain inelastic to substitute with capital was due to low competitive industry.",
keywords = "Demand, Elasticity, Substitution, Translog, Union",
author = "Shahiri, {Hazrul Izuan} and Zulkifly Osman",
year = "2016",
language = "English",
volume = "8",
pages = "53--71",
journal = "Institutions and Economies",
issn = "2232-1640",
publisher = "University of Malaya",
number = "2",

}

TY - JOUR

T1 - Substitutability of Capital-Labour in the presence of unions in the US postal services industry

AU - Shahiri, Hazrul Izuan

AU - Osman, Zulkifly

PY - 2016

Y1 - 2016

N2 - This paper studies the effects of labour unions on elasticity of substitution between production inputs in the US Postal Service industry. The study uses data from the National Income Product Account (NIPA) and the Current Population Survey (CPS). The paper estimates elasticity substitution between production labour, non-production labour, and capital using CES production functions and translog cost function. The CES production function is estimated by using seemingly unrelated non-linear least square regression of inverse labour demand on the union density and input prices. In the translog cost function, seemingly unrelated linear regression is employed to run regression of cost share of operation labour and cost share of non-operation labour on union density and input prices. Further, the paper uses an instrumental variable of union density in the federal sector to solve the endogeneity of the union density. The analysis indicates that the labour union did not reduce elasticity substitution between production inputs. However, the union was able to maintain inelastic substitution between production labour and capital and between non-production labour and capital. The results of this study suggest that the strength of production labour and non-production labour to remain inelastic to substitute with capital was due to low competitive industry.

AB - This paper studies the effects of labour unions on elasticity of substitution between production inputs in the US Postal Service industry. The study uses data from the National Income Product Account (NIPA) and the Current Population Survey (CPS). The paper estimates elasticity substitution between production labour, non-production labour, and capital using CES production functions and translog cost function. The CES production function is estimated by using seemingly unrelated non-linear least square regression of inverse labour demand on the union density and input prices. In the translog cost function, seemingly unrelated linear regression is employed to run regression of cost share of operation labour and cost share of non-operation labour on union density and input prices. Further, the paper uses an instrumental variable of union density in the federal sector to solve the endogeneity of the union density. The analysis indicates that the labour union did not reduce elasticity substitution between production inputs. However, the union was able to maintain inelastic substitution between production labour and capital and between non-production labour and capital. The results of this study suggest that the strength of production labour and non-production labour to remain inelastic to substitute with capital was due to low competitive industry.

KW - Demand

KW - Elasticity

KW - Substitution

KW - Translog

KW - Union

UR - http://www.scopus.com/inward/record.url?scp=84964273797&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84964273797&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:84964273797

VL - 8

SP - 53

EP - 71

JO - Institutions and Economies

JF - Institutions and Economies

SN - 2232-1640

IS - 2

ER -