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The Location of Firms in Unionized Countries

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  • Jakob Roland Munch

Abstract

This paper develops a two-country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is shown that if the bargaining power of unions differs across countries then, as trade costs are reduced, the country with relatively weak unions gradually acquires all firms. However, for a range of trade costs, it is also a locally stable equilibrium for all firms to locate in the country with strong unions. Copyright The editors of the "Scandinavian Journal of Economics", 2002 .

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  • Jakob Roland Munch, 2003. "The Location of Firms in Unionized Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 49-72, March.
  • Handle: RePEc:bla:scandj:v:105:y:2003:i:1:p:49-72
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    References listed on IDEAS

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    Cited by:

    1. Andreas Haufler & Ferdinand Mittermaier, 2011. "Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 121(553), pages 793-818, June.
    2. Damiaan Persyn, 2009. "Union wage demands with footloose firms," Working Papers VIVES Research Centre for Regional Economics 3, KU Leuven, Faculty of Economics and Business, VIVES Research Centre for Regional Economics.
    3. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research.
    4. Silvia Rocha‐Akis & Ronnie Schöb, 2011. "Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms," Scandinavian Journal of Economics, Wiley Blackwell, pages 93-119.
    5. Egger, Hartmut & Etzel, Daniel, 2014. "Union wage-setting and international trade with footloose capital," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 56-67.
    6. Persyn, Damiaan, 2013. "Union wage demands with footloose firms and agglomeration forces," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 142-150.
    7. Damiaan Persyn, 2006. "Trade and Race-to-the-bottom Wage Competition," LICOS Discussion Papers 17306, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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