Unionized Oligopoly, Trade Liberalization and Location Choice

In a two-country reciprocal dumping model, with one country unionized, we analyze how wage setting and firm location are influenced by trade liberalization. We show that trade liberalization can induce FDI, which is at odds with conventional theoretical wisdom and cannot happen in a corresponding model without unionization. FDI is undertaken partly to win a distributional battle with unionized labor, and the incentives to invest abroad can be too large seen from a welfare point of view.unionized oligopoly, economic integration, foreign direct investment

Globalisation and union opposition to technological change

We find that trade unions have a rational incentive to oppose the adaption of labour-saving technology when labour demand is inelastic and unions care much for employment relative to wages. Trade liberalisation typically increases trade union technology opposition. These conclusions are reached in a model of international duopoly with monopoly wage setting in one of the countries, and two-way trade. An important stepping stone for the result is to note that even though trade liberalisation means a tougher competitive environment for firms, labour demand tends to increase. We also find that the incentive for technology opposition is stronger in the more technologically advanced country and in the country with the larger home market, complementing earlier explanations for technological catch-up and leapfrogging. -- Es wird gezeigt, dass Gewerkschaften einen rationalen Anreiz haben, sich gegen die Einführung von arbeitssparendem technologischen Fortschritt zu wehren, wenn die Arbeitsnachfrage unelastisch ist und den Gewerkschaften das Beschäftigungsniveau im Vergleich zur Lohnhöhe relativ wichtig ist. Handelsliberalisierung verschärft typischerweise diesen Widerstand gegen neue Technologien. Diese Schlussfolgerungen werden abgeleitet in einem internationalen Duopolmodell. Dabei werden in einem Land die Löhne kollektiv festgelegt und es findet internationaler Handel statt. Zentral für die Einsicht des Modells ist die Tatsache, dass der internationale Handel zwar den Wettbewerb zwischen den Unternehmen verstärkt, sich aber positiv auf die Arbeitsnachfrage auswirkt. Auch zeigt sich, dass der Widerstand gegen neue Technologien im technologisch fortgeschritteneren Land stärker ist, sowie in dem Land mit größerem Heimatmarkt. Dies liefert eine zusätzliche Erklärung für technologische Aufholprozesse und wechselnde Technologieführerschaft.Trade liberalisation,technology adaption,international unionised oligopoly

North-South technology transfer in unionised multinationals

We study how incentives for North-South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised,incentives for technology transfers are partly governed by firms' desire to curb trade union power. This will affect not only the extent but also the type of technology transfer. While skill upgrading of southern workers benefits these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces two vertically differentiated products in northern and southern subsidiaries, respectively.North-South technology transfer, Multinationals, Trade unions, Minimum wages

North-South Technology Transfer in Unionised Multinationals

We study how incentives for North-South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised, incentives for technology transfers are partly governed by firms’ desire to curb trade union power. This will affect not only the extent but also the type of technology transfer. While skill upgrading of southern workers benefits these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces two vertically differentiated products in northern and southern subsidiaries, respectively.North-South technology transfer, multinationals, trade unions, minimum wages

Mergers and capital flight in unionised oligopolies: Is there scope for a 'national champion' policy?

Many policy makers seem to prefer domestic alternatives to cross-broder mergers. Can such sentiments make sense? We contruct a model where cross-border mergers drive down union-set wages, where domestic mergers have larger non-labour cost synergies than international ones, and where policy evaluators care more about workers than capital owners. Apparently, the stage is set for national champion policies to be sensible. However, we also introduce the possibility of capital flight in the sense that a domestic firm can physically move its production out of the country. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger - but capital flight instead.Cross-border merger, national champions, greenfield FDI, trade unions

Can Deunionization Lead to International Outsourcing?

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.international outsourcing, deunionization, globalization

North-South technology transfer in unionised multinationals

We study how incentives for North-South technology transfers in multinational enterprises are a¤ected by labour market institutions. If workers are collectively organised, incentives for technology transfers are partly governed by ?rms? desire to curb trade union power. This will a¤ect not only the extent but also the type of technology transfer. While skill upgrading of southern workers bene?ts these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct ?rm produces two vertically di¤erentiated products in northern and southern subsidiaries, respectively.North-South technology transfer; Multinationals; Trade unions; Minimum wages

Can deunionization lead to international outsourcing?

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 implies higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this results 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.International outsourcing; Deunionization; Globalization

Globalisation and union opposition to technological change

We find that trade unions have a rational incentive to oppose the adoption of labour-saving technology when labour demand is inelastic and unions care much for employment relative to wages. Trade liberalisation typically increases trade union technology opposition. These conclusions are reached in a model of international duopoly with monopoly wage setting in one of the countries, and two-way trade. An important stepping stone for the result is to note that even though trade liberalisation means a tougher competitive environment for firms, labour demand tends to increase. We also find that the incentive for technology opposition is stronger in the more technologically advanced country and in the country with the larger home market, complementing earlier explanations for technological catch-up and leapfrogging.Trade liberalisation; technology adoption; international unionised oligopoly.

North-South technology transfer in unionised multinationals

We study how incentives for North-South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised,incentives for technology transfers are partly governed by firms' desire to curb trade union power. This will affect not only the extent but also the type of technology transfer. While skill upgrading of southern workers benefits these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces two vertically differentiated products in northern and southern subsidiaries, respectively.Fundação para a Ciência e a Tecnologia (FCT