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

Author

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

Abstract

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.

Suggested Citation

  • Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2006. "Can deunionization lead to international outsourcing? [Führt der Rückzug der Gewerkschaften zur internationalen Auslagerung von Arbeitsplätzen?]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-23, WZB Berlin Social Science Center.
    • Handle: RePEc:zbw:wzbmpg:spii200623
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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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