Asymmetric Labor Markets, Southern Wages, and the Location of Firms
AbstractThis paper studies the behavior of firms towards weak labor rights in developing countries (South). A less than perfectly elastic labor supply in the South gives firms oligopsonistic power tempting them to strategically reduce output to cut wages. In an open economy, competitors operating in perfectly competitive labor markets meanwhile enjoy less aggressive competitors and raise output. Finally, competition effect reduces the ex-post output of a relocating firm. These effects reduce relative profitability of the South casting doubts on traditional beliefs that multinationals are attracted to regions with lower wages. Adopting a minimum wage unambiguously enhances Southern competitiveness and welfare.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.17.
Date of creation: Jan 2005
Date of revision:
Labor standards; Labor market imperfection; Oligopsony; Location of firms; Minimum wages; Strategic behavior; Multinationals; Southern welfare;
Other versions of this item:
- Alireza Naghavi, 2007. "Asymmetric Labor Markets, Southern Wages and the Location of Firms," Review of Development Economics, Wiley Blackwell, vol. 11(3), pages 463-481, 08.
- J80 - Labor and Demographic Economics - - Labor Standards - - - General
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-24 (All new papers)
- NEP-GEO-2005-04-24 (Economic Geography)
- NEP-LAB-2005-04-24 (Labour Economics)
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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