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Can Deunionization Lead to International Outsourcing?

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Author Info
Lommerud, Kjell Erik
Meland, Frode
Straume, Odd Rune

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Abstract

We analyze unionized firms’ incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical conciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization - interpreted as either market integration or increased product market competition - will increase incentives for international outsourcing.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6998.

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Date of creation: Oct 2008
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Handle: RePEc:cpr:ceprdp:6998

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Related research
Keywords: Deunionization; Globalization; International outsourcing;

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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Full references

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. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Vertical Separation as a Defense against Strong Suppliers," ISER Discussion Paper 0755, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  2. Frode Meland & Odd Straume, 2007. "Outsourcing in contests," Public Choice, Springer, vol. 131(3), pages 315-331, June. [Downloadable!] (restricted)
    Other versions:
  3. Erkki Koskela & Rune Stenbacka, 2007. "Equilibrium Unemployment with Outsourcing under Labour Market Imperfections," IZA Discussion Papers 2628, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Aronsson, Thomas & Koskela, Erkki, 2009. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," IZA Discussion Papers 4196, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Erkki Koskela & Rune Stenbacka, 2007. "Equilibrium Unemployment with Outsourcing under Labour Market Imperfections," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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