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Foreign direct investment, unionised labour markets and welfare

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  • Cao, Jiyun
  • Mukherjee, Arijit

Abstract

Although empirical evidence on the relationship between labour union and foreign direct investment (FDI) is mixed, the theoretical literature mainly explains the negative relationship between labour union and FDI. We show that a multinational firm may prefer FDI in the presence of labour unions if it is sufficiently technologically superior to its domestic counterpart. FDI (compared to export) makes the domestic labour union better off but it makes the consumers, the domestic firm, the foreign labour union and the foreign country worse off, and may reduce domestic welfare. We show the implications of industry-wide and firm-specific labour unions.

Suggested Citation

  • Cao, Jiyun & Mukherjee, Arijit, 2018. "Foreign direct investment, unionised labour markets and welfare," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 330-339.
  • Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:330-339
    DOI: 10.1016/j.iref.2018.04.004
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    More about this item

    Keywords

    Foreign direct investment; Labour union; Welfare;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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