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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
Date of revision:
Handle: RePEc:zbw:wzbmpg:spii200623
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  2. Kjell Lommerud & Frode Meland & Odd Rune Straume, 2004. "Globalisation And Union Opposition To Technological Change," Royal Economic Society Annual Conference 2004 49, Royal Economic Society.
  3. Stephen Machin, 2000. "Union Decline in Britain," British Journal of Industrial Relations, London School of Economics, vol. 38(4), pages 631-645, December.
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