Labour unrest and the quality of production: Evidence from the construction equipment resale market

Alexandre Mas

Research output: Contribution to journalArticlepeer-review

57 Scopus citations

Abstract

This paper examines the construction equipment resale market to assess whether equipment produced by the world's largest manufacturer of construction machinery, Caterpillar, experienced lower product quality in facilities that underwent contract disputes during the 1990's. Analysis of auction data reveals that resale market participants significantly discounted machines produced in these dispute-affected facilities. Additionally, pieces of equipment produced in facilities undergoing unrest were resold more often, received worse appraisal reports, and had lower list prices. Taken together, the evidence supports the hypothesis that workmanship at dispute-affected facilities declined and that the resulting impact on the economic quality of the equipment produced was significant. The dispute was associated with at least $400 million in lost service flows due to inferior quality equipment alone.

Original languageEnglish (US)
Pages (from-to)229-258
Number of pages30
JournalReview of Economic Studies
Volume75
Issue number1
DOIs
StatePublished - Jan 2008
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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