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Employment protection and globalisation in dynamic oligopoly

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Author Info
Dewit, Gerda (National University of Ireland Maynooth)
Dermot Leahy
Catia Montagna

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Abstract

We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not.Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

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Publisher Info
Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 57.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:57

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Web page: http://www.res.org.uk/society/annualconf.asp
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Related research
Keywords: uncertainty; flexibility; oligopoly; employment protection; foreign direct investment;

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Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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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.:
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    Other versions:
  4. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February. [Downloadable!] (restricted)
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  14. Smith, Alasdair, 1987. "Strategic investment, multinational corporations and trade policy," European Economic Review, Elsevier, vol. 31(1-2), pages 89-96. [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. Dewit, G. & Holger, G. & Montagna, C., 2003. "Should I stay or should I go? A note on employment protection, domestic anchorage, and FDI," Economics, Finance and Accounting Department Working Paper Series n1291003, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
    Other versions:
  2. Alireza Naghavi, 2005. "Asymmetric Labor Markets, Southern Wages, and the Location of Firms," Working Papers 2005.17, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  3. Kjell Erik Lommerud & Odd Rune Straume, 2008. "Employment Protection versus Flexicurity: On Technology Adoption in Unionised Firms," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. 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)
  5. Haaland, Jan I. & Wooton, Ian, 2003. "Domestic Labour Markets and Foreign Direct Investment," CEPR Discussion Papers 3989, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Kjell Erik Lommerud & Odd Rune Straume, 2007. "Technology resistance and globalisation with trade unions: the choice between employment protection and flexicurity," NIPE Working Papers 25/2007, NIPE - Universidade do Minho. [Downloadable!]
  7. Martin Robson & Roxana Radulescu, 2004. "Does stricter employment protection legislation deter FDI?," Money Macro and Finance (MMF) Research Group Conference 2003 81, Money Macro and Finance Research Group. [Downloadable!]
  8. Alireza Naghavi, 2003. "Asymmetric Labor Markets and the Location of Firms - Are Multinationals Attracted to Weak Labor Standards?," Working Papers 200323, School Of Economics, University College Dublin. [Downloadable!]
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