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Unionised Oligopoly, Trade Liberalisation and Location Choice

  • Kjell Erik Lommerud
  • Frode Meland
  • Lars S¯rgard

In a two-country reciprocal dumping model, with one country unionised, we analyse how wage setting and firm location are influenced by trade liberalisation. We show that trade liberalisation can induce FDI, which is at odds with conventional theoretical wisdom and cannot happen in a corresponding model without unionisation. FDI is undertaken partly to win a distributional battle with unionised labour and the incentives to invest abroad can be too large seen from a welfare point of view. Copyright 2003 Royal Economic Society.

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

Volume (Year): 113 (2003)
Issue (Month): 490 (October)
Pages: 782-800

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:490:p:782-800
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