Academic journal article Atlantic Economic Journal

The Effect of Strikes on Economic Growth

Academic journal article Atlantic Economic Journal

The Effect of Strikes on Economic Growth

Article excerpt

The Effect of Strikes on Economic Growth

Much of the existing literature on industrial conflict has dealt with the causes of strikes. Only a very few studies have examined the effects of strikes on economic performance. However, an understanding of both aspects of industrial conflict is important from a theoretical as well as a policy point of view. This note reports some findings of an on-going research project on the relationship between strikes and economic growth.

There are mainly two contending hypotheses on the effects of strikes on economic growth: the neo-classical and the neo-institutionalist. The former predicts a negative effect of strikes on economic growth as strikes are assumed to be a part of the rent seeking activities of trade unions. The latter predicts a positive effect as strikes are considered to be the most effective mechanism to neutralize excessive use or abuse of managerial powers and discretion. This study subjects these contending hypotheses to an empirical test using a sample of 50 countries from 1970-81.

Per capita days lost due to strikes was used as an index of industrial conflict. It was then incorporated into a production function of the Cobb-Douglas type. An estimating equation was derived for regression analysis and coefficients were estimated using ordinary least squares. The following results were obtained: Growth of GDP =

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