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Unionisation and Foreign Direct Investment

  • Leahy, Dermot
  • Montagna, Catia

This paper investigates the effects of different degrees of wage setting centralisation on (1) the incentive of a MNE to locate in a host country, (2) the optimal level of investment it decides to commit to its foreign operation, and (3) the host country's welfare. Decentralised and centralised wage bargaining are considered. The nature of product market competition between the MNE and domestic firms affects results that cast doubt on some of the conventional wisdom on FDI. In particular, we show that: (i) it is not always welfare improving to attract inward FDI, and (ii) the MNE may prefer centralised to decentralised wage setting regimes.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2260.

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Date of creation: Oct 1999
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Handle: RePEc:cpr:ceprdp:2260
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  1. Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
  2. Bond, Eric W & Guisinger, Stephen E, 1985. "Investment Incentives as Tariff Substitutes: A Comprehensive Measure of Protection," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 91-97, February.
  3. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  4. Dinopoulos, Elias, 1983. "Import competition, international factor mobility and lobbying responses: the schumpeterian industry case," Journal of International Economics, Elsevier, vol. 14(3-4), pages 395-410, May.
  5. Janeba, Eckhard, 1996. "Foreign direct investment under oligopoly: Profit shifting or profit capturing?," Journal of Public Economics, Elsevier, vol. 60(3), pages 423-445, June.
  6. Michele Santoni, . "Union-Oligopoly Sequential Bargaining: Trade and Industrial Policies," Discussion Papers 94/24, Department of Economics, University of York.
  7. Bughin, Jacques & Vannini, Stefano, 1995. "Strategic direct investment under unionized oligopoly," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 127-145, March.
  8. Zhao, Laixun, 1995. "Cross-hauling direct foreign investment and unionized oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1237-1253, June.
  9. Huizinga, H.P., 1993. "International market integration and union wage bargaining," Other publications TiSEM 567712dd-8f03-40d8-8428-c, Tilburg University, School of Economics and Management.
  10. Brander, James A. & Spencer, Barbara J., 1987. "Foreign direct investment with unemployment and endogenous taxes and tariffs," Journal of International Economics, Elsevier, vol. 22(3-4), pages 257-279, May.
  11. Sajal Lahiri & Yoshiyasu Ono, 1998. "Tax policy on foreign direct investment in the presence of cross-hauling," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 263-279, June.
  12. Brecher, Richard A & Long, Ngo Van, 1989. "Trade Unions in an Open Economy: A General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, vol. 65(190), pages 234-39, September.
  13. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
  14. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  15. Haaparanta, Pertti, 1996. "Competition for foreign direct investments," Journal of Public Economics, Elsevier, vol. 63(1), pages 141-153, December.
  16. Bond, Eric W. & Samuelson, Larry, 1989. "Bargaining with commitment, choice of techniques, and direct foreign investment," Journal of International Economics, Elsevier, vol. 26(1-2), pages 77-97, February.
  17. Zhao, Laixun, 1998. "The Impact of Foreign Direct Investment on Wages and Employment," Oxford Economic Papers, Oxford University Press, vol. 50(2), pages 284-301, April.
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