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Union Bargaining Power, Social Dumping, and Foreign Direct Investment

  • Dermot Leahy

    (University College Dublin)

  • Catia Montagna

    (University of Dundee)

This paper examines Foreign Direct Investment in the presence of labour unions. An oligopoly model is developed in which identical firms locate in a host country in order to export to a foreign country. These firms are unionised and compete with foreign firms on the foreign market. We consider the incentives for social dumping via restrictive labour legislation which we assume can be used by the host country government to affect the bargaining power of unions. We ask whether it is in the interest of the importing foreign country for the host country to relax or to tighten labour laws.

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Paper provided by EconWPA in its series International Trade with number 0510001.

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Length: 16 pages
Date of creation: 05 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0510001
Note: Type of Document - pdf; pages: 16
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  1. Dermot Leahy & Catia Montagna, . "Temporary Social Dumping, Union Legalisation and FDI: A Note on the Strategic Use of Standards," EPRU Working Paper Series 99-08, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Casella, Alessandra, 1995. "Free Trade and Evolving Standards," CEPR Discussion Papers 1204, C.E.P.R. Discussion Papers.
  3. Zhao, Laixun, 1995. "Cross-hauling direct foreign investment and unionized oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1237-1253, June.
  4. Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
  5. Lahiri, S. & Ono, Y., 1998. "Export-Oriented Foreign Direct Investment and Local Content Requirement," ISER Discussion Paper 0456, Institute of Social and Economic Research, Osaka University.
  6. Leahy, D. & Montagna, C., 1999. "Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?," Papers 99/15, College Dublin, Department of Political Economy-.
  7. Robin Naylor & Michele Santoni, 2003. "Foreign direct investment and wage bargaining," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(1), pages 1-18.
  8. 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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