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Mergers and capital flight in unionised oligopolies: Is there scope for a 'national champion' policy?

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Abstract

Many policy makers seem to prefer domestic alternatives to cross-broder mergers. Can such sentiments make sense? We contruct a model where cross-border mergers drive down union-set wages, where domestic mergers have larger non-labour cost synergies than international ones, and where policy evaluators care more about workers than capital owners. Apparently, the stage is set for national champion policies to be sensible. However, we also introduce the possibility of capital flight in the sense that a domestic firm can physically move its production out of the country. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger - but capital flight instead.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 10/2008.

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Date of creation: 2008
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Handle: RePEc:nip:nipewp:10/2008

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Keywords: Cross-border merger; national champions; greenfield FDI; trade unions;

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References

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Citations

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Cited by:
  1. Maria Bas & Juan Carluccio, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
  2. Maria Bas & Juan Carluccio, 2010. "Wage Bargaining and the Boundaries of the Multinational Firm," Working Papers 2010-03, CEPII research center.
  3. Fernando Alexandre & Miguel Portela & Carla Sá, 2008. "Admission conditions and graduates' employability," NIPE Working Papers 16/2008, NIPE - Universidade do Minho.
  4. Kjell Lommerud & Trond Olsen & Odd Straume, 2010. "Company Taxation and Merger Incentives in International Oligopoly: on International Policy Coordination with Strategic Trade," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 161-186, June.
  5. Domenico Buccella, 2011. "Labor unions and economic integration: A review," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 25-89, January-D.
  6. Natália P. Monteiro & Paulo Bastos, 2009. "Managers and wage policies," NIPE Working Papers 2/2009, NIPE - Universidade do Minho.

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