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Mergers and capital flight in unionised oligopolies: Is there scope for a "national champion" policy?

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

Abstract

Many policy makers seem to prefer domestic alternatives to cross-border mergers. We construct a model where cross-border mergers drive down union-set wages, domestic mergers have non-labour cost synergies and policy evaluators care more about workers than capital owners. Apparently, the stage is set for "national champion" policies to be sensible. However, we also introduce the possibility of capital flight by allowing a domestic firm to move production abroad. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger -- but capital flight instead.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 20 (2011)
Issue (Month): 2 (April)
Pages: 325-341

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Handle: RePEc:eee:reveco:v:20:y:2011:i:2:p:325-341

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Web page: http://www.elsevier.com/locate/inca/620165

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Keywords: Cross-border merger National champions Greenfield FDI Trade unions;

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References

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Citations

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Cited by:
  1. Paulo Bastos & Natália P. Monteiro, 2011. "Managers and Wage Policies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 957-984, December.
  2. Alexandre, Fernando & Portela, Miguel & Sá, Carla, 2008. "Admission Conditions and Graduates' Employability," IZA Discussion Papers 3530, Institute for the Study of Labor (IZA).
  3. Bas, Maria & Carluccio, Juan, 2010. "Wage Bargaining and the Boundaries of the Multinational Firm," CEPR Discussion Papers 7867, C.E.P.R. Discussion Papers.
  4. Kjell Lommerud & Trond Olsen & Odd Straume, 2010. "Company Taxation and Merger Incentives in International Oligopoly: on International Policy Coordination with Strategic Trade," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 161-186, June.
  5. Domenico Buccella, 2011. "Labor unions and economic integration: A review," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 25-89, January-D.
  6. Maria Bas & Juan Carluccio, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.

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