We develop a model to illustrate a motive for FDI that derives from a firm's overall locational strategy. A firm, that initially has a plant in its home country, may choose to also have a foreign plant in order to improve its bargaining position versus local labour unions. This permits the firm to reduce wages. Furthermore, the existence of a second foreign plant acts to discipline the demands of foreign workers. Thus, the firm is faced with a link between the wage and its degree of geographical diversification. This drives up the number of plants the firm has in equilibrium.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Volume (Year): 15 (2004) Issue (Month): 4 (October) Pages: 363-374 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF