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Union Bargaining Power, Social Dumping, and Foreign Direct Investment

Author

Listed:
  • Dermot Leahy

    (University College Dublin)

  • Catia Montagna

    (University of Dundee)

Abstract

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.

Suggested Citation

  • Dermot Leahy & Catia Montagna, 2005. "Union Bargaining Power, Social Dumping, and Foreign Direct Investment," International Trade 0510001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpit:0510001
    Note: Type of Document - pdf; pages: 16
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0510/0510001.pdf
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    References listed on IDEAS

    as
    1. Barry, Frank & Bradley, John, 1997. "FDI and Trade: The Irish Host-Country Experience," Economic Journal, Royal Economic Society, vol. 107(445), pages 1798-1811, November.
    2. 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.
    3. Sajal Lahiri & Yoshiyasu Ono, 2003. "Export-Oriented Foreign Direct Investment and Local Content Requirement," Pacific Economic Review, Wiley Blackwell, vol. 8(1), pages 1-14, January.
    4. 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.
    5. Leahy, Dermot & Montagna, Catia, 2000. "Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?," Economic Journal, Royal Economic Society, vol. 110(462), pages 80-92, March.
    6. Dermot Leahy & Catia Montagna, 2001. "Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(3), pages 243-259.
    7. Zhao, Laixun, 1995. "Cross-hauling direct foreign investment and unionized oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1237-1253, June.
    8. Casella, Alessandra, 1995. "Free Trade and Evolving Standards," CEPR Discussion Papers 1204, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Foreign Direct Investment; Labour Unions; Labour Legislation; Social Dumping; Exports.;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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