State plant closing laws: Their union support

Restrictions on entrepreneurial decisions have traditionally been directed at controlling the conditions of work, the physical environment, and the safety and healthfulness of products. Now, however, newly proposed industry regulation takes a different approach: to control business closing and reinvestment decisions. This approach to business regulation relies on two conventional economic arguments, externalities and monopoly power, for its justification. This paper makes a first effort at explaining statistically the political attractiveness of this regulation at the state level. We contend that the legislation will tend to receive its strongest political support in those states where the costs of the restrictions can be externalized to the rest of the country. The authors are indebted to Michael Maloney and John Warner for comments and assistance in interpreting the logit model.