The impact of labor unionization on monitoring costs

Abstract

This paper analyzes the impact of labor unionization on monitoring costs. Our findings show that monitoring costs are significantly higher for unionized firms. We demonstrate that the more complex, industrial relations structures that characterize unionized firms increase monitoring risks and corporate costs. We further show that monitoring agents consider political ideology supportive to labor unions as a parameter that enhances relevant costs. Additionally, we demonstrate that monitoring costs are lower in the presence of employee share ownership. We conclude that labor unionization increases the costs of monitoring agents, a burden which is amplified or mitigated depending on the structure of industrial relations.