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Wage Bargaining and Multinational Firms in General Equilibrium

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  • Carsten Eckel
  • Hartmut Egger

Abstract

This paper studies the relationship between wage negotiations and the mode of foreign market penetration in a general equilibrium framework. We analyze the incentives of firms to set up a foreign production facility for improving their bargaining position vis-Ã -vis local unions. This renders the allocation of bargaining power among firms and unions a key determinant of the share of multinational enterprises and exporting firms. The economic mechanisms in this paper provide novel insights on how wages and unemployment rates adjust to economic integration. We distinguish between short-run effects for a given number of competitors and long-run effects after firm entry/exit. This allows us to identify possible globalization paths and to analyze their consequences for domestic labor markets.

Suggested Citation

  • Carsten Eckel & Hartmut Egger, 2006. "Wage Bargaining and Multinational Firms in General Equilibrium," CESifo Working Paper Series 1711, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1711
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    References listed on IDEAS

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    Cited by:

    1. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    2. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
    3. Koskela, Erkki & Poutvaara, Panu, 2009. "Is There Scope for Gains from Revenue-Neutral Labor Tax Reforms with Flexible Outsourcing?," IZA Discussion Papers 3984, Institute for the Study of Labor (IZA).
    4. Erkki Koskela & Jan König, 2009. "Can Profit Sharing Lower Flexible Outsourcing? A Note," CESifo Working Paper Series 2606, CESifo Group Munich.
    5. Koskela, Erkki & Stenbacka, Rune, 2009. "Equilibrium unemployment with outsourcing under labour market imperfections," Labour Economics, Elsevier, vol. 16(3), pages 284-290, June.
    6. Koskela, Erkki & König, Jan, 2009. "Can Profit Sharing Lower Flexible Outsourcing? A Note," IZA Discussion Papers 4063, Institute for the Study of Labor (IZA).
    7. Gabriel Felbermayr & Mario Larch & Wolfgang Lechthaler, 2012. "The Shimer-Puzzle of International Trade: A Quantitative Analysis," ifo Working Paper Series 134, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Felbermayr, Gabriel J. & Larch, Mario & Lechthaler, Wolfgang, 2012. "Endogenous labor market institutions in an open economy," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 30-45.

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    Keywords

    multinational firms; economic integration; wage bargaining; unemployment;

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