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Unionised Labour Market and Strategic Production Decision of a Multinational

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Author Info
Arijit Mukherjee

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Abstract

I show that a foreign firm may sell the same product through both foreign direct investment (FDI) and export, and this decision depends on the size of the product market. It happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised. Unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty, I explain the co-existence of FDI and export in a world with certainty. The endogenous determination of the wage rate plays an important role for my results. My analysis shows the effects of the fixed cost of FDI and competition in the product market on the production strategy of the foreign firm. Copyright © The Author(s). Journal compilation © Royal Economic Society 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02183.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 532 (October)
Pages: 1621-1639
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Handle: RePEc:ecj:econjl:v:118:y:2008:i:532:p:1621-1639

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  1. Haufler, Andreas & Mittermaier, Ferdinand, 2008. "Unionisation triggers tax incentives to attract foreign direct investment," Discussion Papers in Economics 3752, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  2. Hamid Beladi & Arijit Mukherjee, . "Strategic bi-sourcing," Discussion Papers 08/06, University of Nottingham, School of Economics. [Downloadable!]
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This page was last updated on 2010-1-3.

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