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Unionisation structure and strategic foreign direct investment

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  • Arijit Mukherjee
  • Kullapat Suetrong

Abstract

It is often argued that if the substitutability between workers is sufficiently high, labour is better off under a centralised labour union than under decentralised unions. We show that this may not be the case in an open economy with foreign direct investment as the incentive for outward FDI is higher under a centralised union than under decentralised unions. If the number of firms undertaking FDI under a centralised union is higher than under decentralised unions, their wage rates charged by the labour union and the union utility may be higher under decentralised unions than under a centralised union, and the comparison may depend on the competitiveness of the industry. We also show that there are situations where both the domestic industry and the labour unions prefer decentralised unions over a centralised union.

Suggested Citation

  • Arijit Mukherjee & Kullapat Suetrong, 2007. "Unionisation structure and strategic foreign direct investment," Discussion Papers 07/22, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:07/22
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    References listed on IDEAS

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    1. Matsushima, Noriaki & Mizuno, Tomomichi, 2012. "Profit-enhancing competitive pressure in vertically related industries," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 142-152.
    2. Kangsik, Choi, 2008. "Cournot-Bertrand competition in a unionized mixed duopoly," MPRA Paper 12787, University Library of Munich, Germany, revised 26 Dec 2008.
    3. Choi, Kangsik, 2010. "The Timing of Endogenous Wage Setting under Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 20205, University Library of Munich, Germany.
    4. Choi, Kangsik, 2008. "Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 15468, University Library of Munich, Germany, revised 27 May 2009.
    5. Choi, Kangsik, 2010. "Strategic Budget Constraints of Public Firm under Bertrand Competition of Unionized Mixed Duopoly," MPRA Paper 19969, University Library of Munich, Germany.

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