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Labor-Management Bargaining and Transfer Price in Multinational Corporations

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  • Laixun Zhao

Abstract

In this paper, transfer pricing and its relation with the determination of wages and employment when a subsidiary of the multinational corporation (MNC) is located in a unionized labor market are studied. The author's results suggest that the union prefers to negotiate with headquarters rather than with the subsidiary, while the MNC prefers the opposite, because the MNC can use transfer pricing as a bargaining tool in decentralized labor-management negotiations. Thus, the MNC charges the transfer price differently for the unionized subsidiary than for the profit-maximizing subsidiary. In addition, he conducts several interesting comparative statics analyses.

Suggested Citation

  • Laixun Zhao, 1998. "Labor-Management Bargaining and Transfer Price in Multinational Corporations," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 817-829, November.
  • Handle: RePEc:cje:issued:v:31:y:1998:i:4:p:817-829
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    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • P5 - Economic Systems - - Comparative Economic Systems

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