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Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards

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Dermot Leahy, Catia Montagna

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Abstract

This paper analyses the welfare implications for a developing country of using union legalisation as a policy instrument to attract inward foreign direct investment. While its presence may discourage a foreign multinational (MNE) from locating in the host country, unionisation is an important rent-extracting instrument for the host country. We show that if the MNE benefits from dynamic effects, the host country government may have an incentive to adopt temporary social dumping: banning the union in the short run to extract higher rents in the future. However, if the government can use a fiscal instrument in conjunction with union legalisation, the former can circumvent the need to engage in social dumping.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Journal of International Trade & Economic Development.

Volume (Year): 9 (2000)
Issue (Month): 3 (September)
Pages: 243-259
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Handle: RePEc:taf:jitecd:v:9:y:2000:i:3:p:243-259

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Keywords: Multinationals Social Dumping Labour Standards;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Srinivasan, T-N, 1996. "Trade and Human Rights," Papers 765, Yale - Economic Growth Center.
  2. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  3. Zhao, Laixun, 1998. "The Impact of Foreign Direct Investment on Wages and Employment," Oxford Economic Papers, Oxford University Press, vol. 50(2), pages 284-301, April.
  4. Leahy, Dermot & Montagna, Catia, 2000. "Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?," Economic Journal, Royal Economic Society, vol. 110(462), pages C80-92, March. [Downloadable!] (restricted)
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  5. Casella, Alessandra, 1995. "Free Trade and Evolving Standards," CEPR Discussion Papers 1204, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-89, August. [Downloadable!] (restricted)
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  7. Katrak, Homi, 1977. "Multi-national Monopolies and Commercial Policy," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 283-91, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dermot Leahy & Catia Montagna, 2005. "Union Bargaining Power, Social Dumping, and Foreign Direct Investment," International Trade 0510001, EconWPA. [Downloadable!]
  2. Dermot Leahy & Catia Montagna, 2005. "Union legislation and export platform FDI," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 14(4), pages 437-452, December. [Downloadable!] (restricted)
  3. Gerda Dewit & Holger Görg & Catia Montagna, 2009. "Should I stay or should I go? Foreign direct investment, employment protection and domestic anchorage," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(1), pages 93-110, April. [Downloadable!] (restricted)
  4. Dewit, Gerda & Görg, Holger & Montagna, Catia, 2003. "Should I Stay or Should I Go? A Note on Employment Protection, Domestic Anchorage, and FDI," IZA Discussion Papers 845, Institute for the Study of Labor (IZA). [Downloadable!]
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