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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. Fernando Alexandre & Miguel Portela & Carla Sá, 2008. "Admission conditions and graduates' employability," NIPE Working Papers 16/2008, NIPE - Universidade do Minho.
  2. 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.
  3. Natália P. Monteiro & Paulo Bastos, 2009. "Managers and wage policies," NIPE Working Papers 2/2009, NIPE - Universidade do Minho.
  4. Maria Bas & Juan Carluccio, 2010. "Wage Bargaining and the Boundaries of the Multinational Firm," Working Papers 2010-03, CEPII research center.
  5. 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.
  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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