Does internationalization affect union bargaining power? An empirical study for five EU countries

Dumont, Michel; Rayp, Glenn; Willemé, Peter

doi:10.1093/oep/gpi052

Cited by 95 publications

(104 citation statements)

References 33 publications

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“…So, if unions think globalization increases the risk of firms leaving the bargaining table, their bargaining power will drop. In the same line of reasoning, Dumont et al (2006) claim that bargaining power can be considered as a measure of the credibility of the respective outside options. As globalization increases the credibility of the firm leaving the bargaining round, sectors with higher import penetration should be associated with lower bargaining power.…”

Section: The Impact Of Globalizationmentioning

confidence: 99%

The effect of globalization on union bargaining and price-cost margins of firms

2009

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Abstract:In recent years, Europe has witnessed an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states have joined the European Union. This paper analyzes how this process of increased economic integration has affected labor and product markets. To this end, we use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them.Our findings can be summarized as follows: On average, firms set prices about 30% above marginal costs, but there is substantial variation across sectors, with the lowest mark-up around 19% and the highest around 52%. In addition, we find evidence that unions bargain over both wages and employment. We estimate an index of bargaining power, which reflects the fraction of profits that is passed on to workers into higher wages. Depending on the sector, this fraction varies between 6% and 18% and it increases with the markups of firms. Finally, we find that globalization puts pressure on both markups and union bargaining power, especially when there is increased competition from the low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

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Section: The Impact Of Globalizationmentioning

confidence: 99%

The effect of globalization on union bargaining and price-cost margins of firms

2009

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“…In recent years, there has been a small number of studies that simultaneously consider imperfections in the product and the labor markets (Bughin, 1996 1 By estimating jointly price-cost markups in the product market and the extent of rent sharing in the labor market, these studies contribute to bridging the gap between the econometric literature on product market imperfections and the one on labor market imperfections. They basically follow two closely related but distinct approaches: one which entails estimating a structural model including the full set of explicitly speci…ed factor share equations and the production function (Bughin, 1996;Dumont et al 2006 andNeven et al, 2006); the other extending Hall's (1988) framework which relies on estimating a reduced form equation. Following this second approach and using a large panel data sample of French manufacturing …rms, this paper on the one hand extends the framework of our previous work and on the other hand provides a detailed analysis of product and labor market imperfections as two major sources of discrepancies between input factor prices and marginal productivities.…”

Section: Introductionmentioning

confidence: 99%

Panel Data Estimates Of The Production Function And Product And Labor Market Imperfections

Dobbelaere¹,

Mairesse²

2008

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Consistent with two models of imperfect competition in the labor market, the efficient bargaining model and the monopsony model, we provide two extensions of a microeconomic version of Hall's framework for estimating price-cost margins. We show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue, that can be characterized by a "joint market imperfections parameter". Using an unbalanced panel of 10646 French firms in 38 manufacturing industries over the period 1978-2001, we can classify these industries into six different regimes depending on the type of competition in the product and the labor market. By far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market (IC-EB), followed by a regime of imperfect competition in the product market and perfect competition or right-to-manage bargaining in the labor market (IC-PR), and by a regime of perfect competition in the product market and monopsony in the labor market (PC-MO). For each of these three predominant regimes, we assess within-regime firm differences in the estimated average price-cost mark-up and rent-sharing or labor supply elasticity parameters, following the Swamy methodology to determine the degree of true firm dispersion. As a way to assess the plausibility of our findings in the case of the dominant regime (IC-EB), we also relate our industry and firm-level estimates of price-cost mark-up and relative extent of rent sharing to industry characteristics and firm-specific variables respectively.

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“…To the extent that aspects of globalisation may be helping to restrain the cost of capital or labour costs (Rodrick, 1999;Dumont et al, 2006;IMF, 2007), and also because of the potential feedback of changes in price inflation to wages, it is possible that the implicit net disinflationary impact of globalisation on price inflation is understated in this paper. The same holds for inflation expectations, if globalisation has led to a decline in inflation expectations or helped expectations to become better anchored.…”

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confidence: 99%

Globalisation and OECD consumer price inflation

Pain¹,

Koske²,

Sollie³

2008

OECD Journal: Economic Studies

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Over the past 25 years inflation has moderated considerably in all OECD economies. At the same time, the production of many goods and services has become increasingly internationalised and the level of trade between the OECD and non-OECD economies has risen markedly. This paper investigates the extent to which the observed changes in the inflation process can be attributed to the increasing integration of non-OECD economies into the global economy. The results of the analysis show that i) import prices have become a more important driver of domestic consumer prices since the mid-1990s; ii) the sensitivity of inflation to domestic economic conditions has declined whereas the sensitivity to foreign economic conditions has risen, working through import prices; and iii) the strong GDP growth in the non-OECD economies over the past five years has contributed to the growth of real oil and metals prices. A scenario analysis shows that globalisation has put upward pressure on inflation via higher commodity prices and downward pressure via lower non-commodity import prices with the latter effect having dominated in most OECD economies.

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Does internationalization affect union bargaining power? An empirical study for five EU countries

Cited by 95 publications

References 33 publications

The effect of globalization on union bargaining and price-cost margins of firms

The effect of globalization on union bargaining and price-cost margins of firms

Panel Data Estimates Of The Production Function And Product And Labor Market Imperfections

Globalisation and OECD consumer price inflation

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