Can deunionization lead to international outsourcing?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze unionized firms' incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining inhouse 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. Terms of use: Documents in EconStor mayJEL Code: F16, J51, L24.

Labor market deregulation and globalization: empirical evidence from OECD countries

“…First, globalization might operate via the threat of outsourcing. 19 Second, globalization may increase the incentives for international outsourcing (Lommerud et al 2009). …”

Offshoring domestic jobs

“…Existing contributions usually consider a partial equilibrium environment, and hence they are not equipped to identify economy-wide employment effects. Prominent examples include Mezzetti and Dinopoulos (1991), Skaksen and Sørensen (2001), Skaksen (2004), andLommerud, Meland, andStraume (2009). performing two tasks, which differ in their offshorability. One task is non-routine and requires face-to-face communication, and it must therefore be produced at the firm's headquarters location.…”

Equilibrium unemployment with outsourcing under labour market imperfections

“…He assumed that the firms do not commit themselves to outsourcing prior wage negotiation, but that the outsourcing decisions are made after the wage negotiations. Lommerud, Meland and Straume (2005) have analyzed the incentives of firms operating in unionized industries to outsource the production of intermediate goods to foreign low-cost subcontractors. They argue that firms will have returns from outsourcing if they face stronger unions, contributing to higher domestic wages.…”