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

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Author Info

  • Dermot Leahy
  • Catia Montagna

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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File URL: http://www.tandfonline.com/doi/abs/10.1080/09638190050086168
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Bibliographic Info

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

Volume (Year): 9 (2001)
Issue (Month): 3 ()
Pages: 243-259

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Handle: RePEc:taf:jitecd:v:9:y:2001:i:3:p:243-259

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Related research

Keywords: Multinationals; Social Dumping; Labour Standards;

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Cited by:
  1. Dermot Leahy & Catia Montagna, 2005. "Union legislation and export platform FDI," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 437-452.
  2. 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).
  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.
  4. Dermot Leahy & Catia Montagna, 2005. "Union Bargaining Power, Social Dumping, and Foreign Direct Investment," International Trade 0510001, EconWPA.

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