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Threat Effect of Foreign Direct Investment on Labor Union Wage Premium

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  • Minsik Choi

Abstract

This paper explores the impact of “threat effects” of foreign direct investment on labor markets in the United States. In this context, the term “threat effect” refers to the use by employers of the implicit or explicit threat that they will move all or part of their production to a different location, even if they do not actually do so. In this paper, I construct a unique industry level panel data set and I show that the union wage premium has been negatively associated with the stock of outward FDI in the U.S. manufacturing sector for the period of 1983-1996. The union wage premium is chosen as the dependent variable to test the hypothesis that the increased capital mobility changes the nature of bargaining between workers and employers as predicted in threat effect theory.

Suggested Citation

  • Minsik Choi, 2001. "Threat Effect of Foreign Direct Investment on Labor Union Wage Premium," Working Papers wp27, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp27
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    Cited by:

    1. M. Magnani, 2009. "Labor share dynamics: a survey of the theory," Economics Department Working Papers 2009-EP07, Department of Economics, Parma University (Italy).
    2. Kohler, Karsten & Guschanski, Alexander & Stockhammer, Engelbert, 2018. "The impact of financialisation on the wage share. A theoretical clarification and empirical test," Economics Discussion Papers 2018-1, School of Economics, Kingston University London.
    3. Stephanie Seguino, 2005. "Gender Inequality in a Globalizing World," Economics Working Paper Archive wp_426, Levy Economics Institute.
    4. Brännlund, Runar & Nordström, Jonas & Svedin, Dick, 2004. "Foreign ownership and effects on employment and wages: The case of Sweden," Umeå Economic Studies 638, Umeå University, Department of Economics, revised 01 Nov 2004.
    5. Seguino, Stephanie, 2007. "Is more mobility good?: Firm mobility and the low wage-low productivity trap," Structural Change and Economic Dynamics, Elsevier, vol. 18(1), pages 27-51, March.
    6. Joseph A. Clougherty & Klaus Gugler & Lars Sørgard, 2012. " Cross-Border Mergers and Domestic Wages: Integrating Positive 'Spillover' Effects and Negative 'Bargaining' Effects," Department of Economics Working Papers wuwp136, Vienna University of Economics and Business, Department of Economics.
    7. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
    8. Onaran, Özlem & Guschanski, Alexander, 2016. "The political economy of income distribution: industry level evidence from Austria," Greenwich Papers in Political Economy 15865, University of Greenwich, Greenwich Political Economy Research Centre.
    9. Joseph A Clougherty & Klaus Gugler & Lars Sørgard & Florian W Szücs, 2014. "Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 450-470, May.
    10. 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.
    11. William Milberg & Deborah Winkler, 2009. "Globalization, Offshoring and Economic Insecurity in Industrialized Countries," Working Papers 87, United Nations, Department of Economics and Social Affairs.
    12. Köhler, Karsten & Guschanski, Alexander & Stockhammer, Engelbert, 2015. "How does financialisation affect functional income distribution? A theoretical clarification and empirical assessment," Economics Discussion Papers 2015-5, School of Economics, Kingston University London.
    13. Balsvik, Ragnhild & Sæthre, Morten, 2014. "Rent Sharing with Footloose Production. Foreign Ownership and Wages Revisited," Discussion Paper Series in Economics 30/2014, Norwegian School of Economics, Department of Economics.
    14. Sebastian Braun, 2009. "Should trade unions welcome foreign investors? First evidence from Danish matched employer-employee data," Economics Bulletin, AccessEcon, vol. 29(2), pages 1175-1181.
    15. Anastasia Guscina, 2006. "Effects of Globalization on Labor’s Share in National Income," IMF Working Papers 06/294, International Monetary Fund.

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