Foreign Direct Investment, Labour Market Regulation and Self-Interested Governments
AbstractThis document examines foreign direct investment (FDI) when multinationals and labour unions bargain over labour contracts and lobby the self-interested government for taxation and labour market regulation. We demonstrate that right-to-manage bargaining predicts higher returns for FDI than does non-unionization or efficient bargaining. This advantage is further magnified in the presence of credible wage contracts. When the labour market is nonunionized, or there is a bargain over employment, the ruling elite reaps the surplus of FDI through taxation or regulation. In the absence of credible contracts, unions have incentives to claim a bigger share of the revenue of FDI.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 793.
Length: 27 pages
Date of creation: Jun 2003
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Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-25 (All new papers)
- NEP-IFN-2003-07-21 (International Finance)
- NEP-LAM-2003-06-25 (Central & South America)
- NEP-MAC-2003-06-25 (Macroeconomics)
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