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International outsourcing and trade union (de-)centralisation

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  • Lommerud, Kjell Erik
  • Meland, Frode
  • Straume, Odd Rune

Abstract

We study the effects of centralised versus decentralised wage setting in a unionsed duopoly where firms can outsource parts of input production to foreign subcontractors. We show that decentralised (as opposed to centralised) wage setting allows trade unions to capture a larger share of the rents generated by international outsourcing. Consequently, the equilibrium degree of outsourcing is lower under decentralised wage setting, which benefits unions if they are sufficiently employment oriented. We identify situations in which both firms and unions prefer decentralised over centralised wage setting. Thus, international outsourcing opportunities is a potential driver of trade union decentralisation.

Suggested Citation

  • Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2021. "International outsourcing and trade union (de-)centralisation," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 76-91.
    • Handle: RePEc:eee:jeborg:v:187:y:2021:i:c:p:76-91
    DOI: 10.1016/j.jebo.2021.04.014
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    1. Chrysovalantou Milliou, 2023. "Outsourcing without Cost Advantages," CESifo Working Paper Series 10645, CESifo.

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    More about this item

    Keywords

    Outsourcing; Trade unions; Decentralisation;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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