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The impact of worker bargaining power on the organization of global firms

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  • Carluccio, Juan
  • Bas, Maria

Abstract

Do variations in labor market institutions affect the cross-border organization of the firm? Using firm-level data on multinationals located in France, we show that firms are more likely to outsource the production of intermediate inputs to external suppliers when importing from countries with high worker bargaining power. This effect is stronger for firms operating in capital-intensive and differentiated industries. We propose a theoretical mechanism that rationalizes these findings. The fragmentation of the value chain weakens the workers' bargaining position, by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces the share of surplus that is appropriated by the union, which enhances the firm's incentives to invest. Since investment creates relatively more value in capital-intensive industries, increases in worker bargaining power are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that global firms choose their organizational structure strategically when sourcing intermediate inputs from markets where worker bargaining power is high.

Suggested Citation

  • Carluccio, Juan & Bas, Maria, 2015. "The impact of worker bargaining power on the organization of global firms," Journal of International Economics, Elsevier, vol. 96(1), pages 162-181.
  • Handle: RePEc:eee:inecon:v:96:y:2015:i:1:p:162-181
    DOI: 10.1016/j.jinteco.2014.12.008
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    Cited by:

    1. Sabien Dobbelaere & Kozo Kiyota, 2017. "Labor market imperfections, markups and productivity in multinationals and exporters," Tinbergen Institute Discussion Papers 17-113/V, Tinbergen Institute.
    2. Chrysovalantou Milliou & Joel Sandonis, 2016. "Vertical Foreign Direct Investment: Make, Sell and (Not) Buy," CESifo Working Paper Series 6190, CESifo Group Munich.
    3. repec:eee:reveco:v:51:y:2017:i:c:p:455-469 is not listed on IDEAS
    4. repec:eee:labeco:v:53:y:2018:i:c:p:198-212 is not listed on IDEAS

    More about this item

    Keywords

    Worker bargaining power; Labor market imperfections; Outsourcing; Multinational firms;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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