This study investigats the impact of labor unions on productivity and technical inefficiency of the U.S. manufacturing sector, using state-level panel data on 48 states from 1983 to 1996. The results indicate that while labor unions reduce firms' technical progess, they improve firm efficiency in utilizing the existing technology. The fundings also suggest that the decline of unionization rate in the sample period impaired firms' technical efficiency by 2.4 percentage points.
