Exploring relationship between degree of unionization and firm productivity in Indian listed firms

Abstract

This study is among the first to explore the relationship between unionization and firms' productivity, defined as sales per employee, and profitability per employee in India. The Indian context is important given the structural changes in Indian economy post‐1991 (liberalization and movement from dirigisme to an open economy), the unique sociocultural context of Indian unions and growth and size of economy. The final dataset of the study consisted of 91 largest firms listed on the Bombay Stock Exchange in India. The data were collected from audited annual reports and analyzed using a modified Cobb–Douglas function. It was found that the degree of unionization, which is percentage of employees who were member of a trade union, had an overall positive impact on the firms' productivity. Contrary to the dominant view of private sector firms being more productive, we found empirical evidence for the effect of unionization on productivity being greater for public sector firms.