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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.

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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
    DOI: 10.1111/1467-9442.00004
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    Citations

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    Cited by:

    1. Damiaan Persyn, 2009. "Union wage demands with footloose firms," Working Papers of VIVES - Research Centre for Regional Economics 3, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    2. 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.
    3. Silvia Rocha‐Akis & Ronnie Schöb, 2011. "Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 93-119, March.
    4. Tapio Palokangas, 2020. "Public policy, footloose capital, and union influence," Review of International Economics, Wiley Blackwell, vol. 28(4), pages 976-991, September.
    5. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research.
    6. Colin Davis & Ken-ichi Hashimoto & Ken Tabata, 2021. "Unionization, Industry Concentration, and Economic Growth," ISER Discussion Paper 1154, Institute of Social and Economic Research, Osaka University.
    7. Xinmeng Li & Dao-Zhi Zeng, 2022. "Frictional unemployment, bargaining, and agglomeration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 151-179, February.
    8. 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.
    9. Hosaki Sano, 2018. "Labor union and firm fs relocation: A general oligopolistic equilibrium model analysis," Discussion Papers in Economics and Business 18-15-Rev., Osaka University, Graduate School of Economics, revised May 2018.
    10. Persyn, Damiaan, 2013. "Union wage demands with footloose firms and agglomeration forces," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 142-150.
    11. 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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