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The Impact of Foreign Direct Investment on Wages and Employment

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Author Info
Zhao, Laixun
Abstract

This paper studies the impact of foreign direct investment (FDI) on wages and employment. When labor-management bargaining is industrywide, two effects of FDI are identified: the collusion effect and the threat-point effect. It is shown that: (1) FDI always reduces the negotiated wage and (2) FDI reduces union employment and the competitive wage if the union cares more about employment than wages or is equally concerned about employment and wages. However, if labor-management bargaining is firm-specific and unionization is industrywide, then the above effects of FDI are substantially reduced. Copyright 1998 by Royal Economic Society.

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Publisher Info
Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 50 (1998)
Issue (Month): 2 (April)
Pages: 284-301
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Handle: RePEc:oup:oxecpp:v:50:y:1998:i:2:p:284-301

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  1. Dermot Leahy & Catia Montagna, 2005. "Union Bargaining Power, Social Dumping, and Foreign Direct Investment," International Trade 0510001, EconWPA. [Downloadable!]
  2. A. Mukherjee & U. Broll & S. Mukherjee, 2008. "Unionized labor market and licensing by a monopolist," Journal of Economics, Springer, vol. 93(1), pages 59-79, February. [Downloadable!] (restricted)
  3. Leahy, Dermot & Montagna, Catia, 1999. "Unionisation and Foreign Direct Investment," CEPR Discussion Papers 2260, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Carsten Eckel & Hartmut Egger, 2006. "Wage Bargaining and Multinational Firms in General Equilibrium," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Dermot Leahy, Catia Montagna, 2000. "Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 9(3), pages 243-259, September. [Downloadable!] (restricted)
    Other versions:
  6. Minsik Choi, 2001. "Threat Effect of Foreign Direct Investment on Labor Union Wage Premium," Working Papers wp27, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  7. Tapio Palokangas, 2009. "Investment, expropriation, and unionization," Economics of Governance, Springer, vol. 10(1), pages 27-42, January. [Downloadable!] (restricted)
  8. Subhayu Bandyopadhyay, Sudeshna C. Bandyopadhyay, 2001. "Efficient bargaining, welfare and strategic export policy," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 10(2), pages 133-149, June. [Downloadable!] (restricted)
  9. Seguino, Stephanie, 2003. "Taking gender differences in bargaining power seriously: Equity, labor standards, and living wages
    [Gender Equality through Labor Standards and Living Wages: An Exploration of the Issues for Asian
    ," MPRA Paper 6508, University Library of Munich, Germany, revised Oct 2003. [Downloadable!]
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