Suresh Naidu Publications

Collective bargaining agreements (CBAs) specify the contractual rights of unionized workers, but their full legal content has not yet been analyzed by economists. This paper develops novel natural language methods to analyze the empirical determinants and economic value of these rights using a new collection of 30,000 CBAs from Canada in the period 1986-2015. We parse legally binding rights (e.g., “workers shall receive. . . ”) and obligations (e.g., “the employer shall provide. . . ”) from contract text, and validate our measures through evaluation of clause pairs and comparison to firm surveys on HR practices. Using timevarying province-level variation in labor income tax rates, we find that higher taxes increase the share of worker-rights clauses while reducing pre-tax wages in unionized firms, consistent with a substitution effect away from taxed wages toward untaxed rights. Further, an exogenous increase in the value of outside options (from a leave-one-out instrument for labor demand) increases the share of worker rights clauses in CBAs. Combining the regression estimates, we infer that a one-standard-deviation increase in worker rights is valued at about 5.7% of wages.

We provide evidence that democracy has a positive effect on GDP per capita. Our dynamic panel strategy controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy. To reduce measurement error, we introduce a new indicator of democracy that consolidates previous measures. Our baseline results show that democratizations increase GDP per capita by about 20 percent in the long run. We find similar effects using a propensity score reweighting strategy as well as an instrumental-variables strategy using regional waves of democratization. The effects are similar across different levels of development and appear to be driven by greater investments in capital, schooling, and health.

In this paper we revisit the relationship between democracy, redistribution, and inequality. We first explain the theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail to be realized when democracy is captured by the richer segments of the population; when it caters to the preferences of the middle class; or when it opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical literature, which is both voluminous and full of contradictory results. We provide new and systematic reduced-form evidence on the dynamic impact of democracy on various outcomes. Our findings indicate that there is a significant and robust effect of democracy on tax revenues as a fraction of GDP, but no robust impact on inequality. We also find that democracy is associated with an increase in secondary schooling and a more rapid structural transformation. Finally, we provide some evidence suggesting that inequality tends to increase after democratization when the economy has already undergone significant structural transformation, when land inequality is high, and when the gap between the middle class and the poor is small. All of these are broadly consistent with a view that is different from the traditional median voter model of democratic redistribution: democracy does not lead to a uniform decline in post-tax inequality, but can result in changes in fiscal redistribution and economic structure that have ambiguous effects on inequality.