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Can deunionization lead to international outsourcing?
[Führt der Rückzug der Gewerkschaften zur internationalen Auslagerung von Arbeitsplätzen?]

  • Lommerud, Kjell Erik
  • Meland, Frode
  • Straume, Odd Rune

We analyze unionized firms’ incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization – interpreted as either market integration or increased product market competition – will increase incentives for international outsourcing.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2006-23.

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Date of creation: 2006
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Handle: RePEc:zbw:wzbmpg:spii200623
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