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Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?

  • Leahy, Dermot
  • Montagna, Catia

This paper investigates the effects of different degrees of wage setting centralisation on the incentive of a MNE to locate in a host country, and on the host country's welfare. Decentralised and centralised wage bargaining are considered. The nature of product market competition between the MNE and domestic firms proves crucial to results which cast doubt on some of the conventional wisdom on FDI. In particular, we show that: (i) it is not always welfare improving to attract inward FDI, and (ii) the MNE may prefer centralised to decentralised wage setting regimes.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 110 (2000)
Issue (Month): 462 (March)
Pages: C80-92

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Handle: RePEc:ecj:econjl:v:110:y:2000:i:462:p:c80-92
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  1. Santoni, Michele, 1996. "Union-Oligopoly Sequential Bargaining: Trade and Industrial Policies," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 640-63, October.
  2. Brecher, Richard A & Long, Ngo Van, 1989. "Trade Unions in an Open Economy: A General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, vol. 65(190), pages 234-39, September.
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