What happens when unions run firms? Unions as employee representatives and as employers

The paper investigates two faces of unions: a bargainer with employers, and an employer in its own right. We develop parallel models of union-owned and private unionized firms and employ a sample of Israeli manufacturing firms to test various hypotheses. We conclude that: (1) union-owned firms do not behave very differently from their private sector counterparts; (2) higher wages in union-owned firms are associated with higher productivity rather than with systematic differences in weights attached to profits as against wages and employment in the two types of firms; (3) union ownership enhances enterprise productivity; and (4) wage and employment bargains do not lie on the demand curve; instead, efficient bargaining with a stronger emphasis on employment than on wages is found in both firm types.