Two essays on the impact of deregulation on labor in the electric power industry

Chapter One of this dissertation focuses on the impact of deregulation on labor earnings, as well as employment. The findings indicate that union workers in the electric power industry experienced a significant decline in their wage premiums after deregulation (13 percent), while wage premiums of the nonunion workers remained unchanged. Level of employment in the electric power industry exhibited a pattern similar to that of wages, in which the relative employment of union workers was substantially reduced following deregulation (37 percent) while the relative employment of nonunion workers did not show a significant change.; The sensitivity analyses find that high electricity prices may have contributed to the wage reductions occurring in those deregulated states, but that the reductions of employment level in the deregulated states were not related to high electricity prices in these states. In other words, we may not observe significant wage reductions in states with low electricity prices one they deregulate. However, deregulation seems to put pressure directly on the power companies to cut employment.; The findings of Chapter One are consistent with the labor rent sharing hypothesis, which states that labor in the regulated industry, especially union workers, is likely to share rents with their employers. However, we find that high electricity prices, instead of deregulation itself, might have contributed to wage reductions in the deregulated states. Based on the estimated 13 percent drop in union wage premiums, union workers in the electric power industry shared, at least, modest rents with their employers before deregulation. Furthermore, in light of the dramatic reductions in union employment shown in our results, unions in the electric power industry might have traded off the level of employment against wages.; Chapter Two studies unionization and the labor demand using the electric power industry as an illustration. This study finds that the unionization rate has a small but statistically significant effect on the wage elasticity of demand for labor. According to our results, every one percent increase in the unionization rate is accompanied by a .0006 percent decrease in the wage elasticity (less elastic). However, this study does not find significant changes in the union effect on wage elasticity over the course of deregulation after taking into account the effect of technological advances.; The finding of a significant union effect on wage elasticity of labor demand supports the argument that unions care about employment as well as wages. The robustness checks suggest some inconsistency between our theoretical assumption about the production function and the estimated results. This could either be a result of the proxy for the cost of capital used in this Study being a poor indicator, or be a result of some mis-specifications in the production function.; The findings of these two studies suggest that unions have played a very important role in the electric power industry in the pre-deregulation regime. Unionized workers shared rents with their employers. Unions were also able to affect the labor demand by making the wage elasticity of demand for labor less elastic.