Economic Development Policy and Foreign Direct Investment in the American States: Assessing their Impact on Private Sector Unionization

Most previous research on the role of U.S. state policy in shaping unionization outcomes has emphasized presence or absence of “right-to-work” laws as the key explanatory factor. This dissertation emphasizes the role of state economic development programing in driving the variation in unionization observed across the American states. It also revisits the role that foreign direct investment plays in regard to union power.

I first discuss the variation in private sector unionization levels among the 50 states. I then provide a literature review on two key types of economic development policy, entrepreneurial and locational. I revisit previous scholarship on foreign investment, positing that it has a positive association with unionization, contrary to the commonly-accepted view of many scholars.

I then empirically test these hypotheses using two original models of unionization outcomes measured at both macro and micro units of analysis. First, I present an error correction model with time-series cross sectional data on state private union density from 1983-2004. Here I find that “demand-generating” entrepreneurial development strategies exert a negative long-term impact on annual change in union density, while foreign direct investment exerts a positive shock to it. Next I use logistic regression to test for the variables’ impact on individual-level union election outcomes. Here I find that foreign firm nationality and entrepreneurial policy both exert a positive impact on likelihood of unions to win certification elections. Neither presence of a “right-to-work” statute or locational economic development strategies demonstrate significant effect on the long-term decline of union density or on likelihood of union election wins.

Finally, I consider the impact of economic development and unionization on state income inequality from 1983-2004 using an error-correction model. Private sector union density has a negative independent association with inequality, and entrepreneurial policy increases inequality. In the presence of higher levels of entrepreneurial activism, however, private union density losses its significant impact in equalizing the income distribution. I close by discussing some normative implications of the proliferation of economic development policies and conclude that at present most run counter to labor movement goals and power, especially those using entrepreneurial strategies.