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Unionised Labour Market and Strategic Production Decision of a Multinational

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  • Arijit Mukherjee

Abstract

I show that a foreign firm may sell the same product through both foreign direct investment (FDI) and export, and this decision depends on the size of the product market. It happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised. Unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty, I explain the co‐existence of FDI and export in a world with certainty. The endogenous determination of the wage rate plays an important role for my results. My analysis shows the effects of the fixed cost of FDI and competition in the product market on the production strategy of the foreign firm.

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  • Arijit Mukherjee, 2008. "Unionised Labour Market and Strategic Production Decision of a Multinational," Economic Journal, Royal Economic Society, vol. 118(532), pages 1621-1639, October.
    • Handle: RePEc:wly:econjl:v:118:y:2008:i:532:p:1621-1639
    DOI: 10.1111/j.1468-0297.2008.02183.x
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    Cited by:

    1. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.
    2. 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.
    3. You, Jing & Imai, Katsushi S. & Gaiha, Raghav, 2016. "Declining Nutrient Intake in a Growing China: Does Household Heterogeneity Matter?," World Development, Elsevier, vol. 77(C), pages 171-191.
    4. Noriaki Matsushima & Laixun Zhao, 2015. "Strategic dual sourcing as a driver for free revealing of innovation," ISER Discussion Paper 0936, Institute of Social and Economic Research, Osaka University.
    5. Arijit Mukherjee & Kullapat Suetrong, 2012. "Unionisation Structure and Outward Foreign Direct Investment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 266-279, June.
    6. Mukherjee, Arijit & Wang, Leonard F.S., 2013. "Labour union, entry and consumer welfare," Economics Letters, Elsevier, vol. 120(3), pages 603-605.
    7. Beladi, Hamid & Mukherjee, Arijit, 2017. "Union bargaining power, subcontracting and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 90-104.
    8. Asproudis, Elias & Filippiadis, Eleftherios & Tian, Mo, 2022. "Timing of environmental technological choice and trade unions' climate solidarity," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    9. Andreas Haufler & Ferdinand Mittermaier, 2011. "Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 121(553), pages 793-818, June.
    10. Monica Correa Lopez & Rafael Domenech, 2014. "Does anti-competitive service sector regulation harm exporters? Evidence from manufacturing firms in Spain," Working Papers 1413, BBVA Bank, Economic Research Department.
    11. Mukherjee, Arijit, 2010. "Licensing a new product: Fee vs. royalty licensing with unionized labor market," Labour Economics, Elsevier, vol. 17(4), pages 735-742, August.
    12. Arijit Mukherjee & Sugata Marjit, 2009. "Firm productivity and foreign direct investment: a non-monotonic relationship," Economics Bulletin, AccessEcon, vol. 29(1), pages 230-237.
    13. Takeshi Iida & Arijit Mukherjee, 2020. "Make and buy in a polluting industry," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1852-1874, December.
    14. Asproudis, Elias & Filippiadis, Eleftherios, 2021. "Bargaining for Community Fishing Quotas," MPRA Paper 107409, University Library of Munich, Germany.
    15. Dibyendu Maiti & Arijit Mukherjee, 2010. "Trade Liberalisation, Subcontracting and Unionised Wage," Discussion Papers 10/07, University of Nottingham, GEP.
    16. Beladi, Hamid & Mukherjee, Arijit, 2012. "Market structure and strategic bi-sourcing," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 210-219.
    17. Maiti, Dibyendu & Mukherjee, Arijit, 2013. "Trade cost reduction, subcontracting and unionised wage," Labour Economics, Elsevier, vol. 21(C), pages 103-110.
    18. Mukherjee, Arijit, 2013. "Endogenous domestic market structure and the effects of a trade cost reduction in a unionised industry," Economic Modelling, Elsevier, vol. 32(C), pages 30-33.
    19. Marjit, Sugata & Mukherjee, Arijit, 2013. "Foreign competition and social efficiency of entry," Economic Modelling, Elsevier, vol. 32(C), pages 108-112.
    20. Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    21. Hamid Beladi & Arijit Mukherjee, 2008. "Strategic bi-sourcing," Discussion Papers 08/06, University of Nottingham, School of Economics.
    22. Asproudis, Elias, 2011. "Trade union structure with environmental concern and firms' technological choice," MPRA Paper 28767, University Library of Munich, Germany.

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