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Unionized Oligopoly, Trade Liberalization and Location Choice

  • Kjell Erik Lommerud
  • Frode Meland
  • Lars Sørgard

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

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 777.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_777
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  18. Jan Sørensen, 1994. "Market integration and imperfect competition in labor and product markets," Open Economies Review, Springer, vol. 5(1), pages 115-130, March.
  19. Martine Durand & Christophe Madaschi & Flavia Terribile, 1998. "Trends in OECD Countries' International Competitiveness: The Influence of Emerging Market Economies," OECD Economics Department Working Papers 195, OECD Publishing.
  20. Hanson, Gordon H, 1998. "North American Economic Integration and Industry Location," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 30-44, Summer.
  21. Susan E. Feinberg & Michael P. Keane & Mario F. Bognanno, 1998. "Trade Liberalization and Delocalization: New Evidence from Firm-Level Panel Data," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 749-777, November.
  22. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
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