Unionised Oligopoly, Trade Liberalisation and Location Choice

Lommerud, Kjell Erik; Meland, Frode; Sørgard, Lars

doi:10.1111/1468-0297.t01-1-00154

Cited by 115 publications

(121 citation statements)

References 28 publications

(37 reference statements)

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“…The bargaining-effects literature almost entirely consists of theoretical studies (Choi, 2001;Braun, 2008); thus, a sizeable theoretical foundation exists -e.g., Mezetti and Dinopoulos (1991); Lommerud et al (2003Lommerud et al ( , 2005Lommerud et al ( , 2006 -formalizing the idea that FDI allows firms to play off one group of workers against another. Yet to the best of our knowledge, only a handful of studies bring some evidence to bear concerning the empirical robustness of the bargaining-effects mechanism.…”

Section: Background Literaturementioning

confidence: 99%

Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

et al. 2014

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Cross-border mergers and domestic-firm wages: Integrating "spillover effects" and "bargaining effects" Article (Draft) Original Citation: Clougherty, Joseph A. and Gugler, Klaus and Sørgard, Lars and Szücs, Florian (2014) Cross-border mergers and domestic-firm wages: Integrating "spillover effects" and "bargaining effects". Journal of International Business Studies, 45. pp. 450-470. ISSN 0047-2506 This version is available at: http://epub.wu.ac.at/4129/ Available in ePub WU : April 2014 ePub WU , the institutional repository of the WU Vienna University of Economics and Business, is provided by the University Library and the IT-Services. The aim is to enable open access to the scholarly output of the WU.This document is an early version circulated as work in progress. There are minor differences between this and the publisher version which could however affect a citation.http://epub.wu.ac.at/ 1 Cross-border mergers and domestic-firm wages:Integrating 'spillover effects' and 'bargaining effects' Abstract Two literatures exist concerning cross-border merger activity's impact on domestic wages: one focusing on positive spillover-effects; the other focusing on negative bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, our theoretical model generates three formal propositions: cross-border mergers can lead to wage increases via positive spillover-effects; and negative bargaining-effects are relatively more dominant when union market power is high, and when merging firms exhibit relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is characterized as horizontal. Accordingly, future research on how cross-border mergers affect domestic wages should be mindful that both spillover and bargaining effects are at play, and that the degree of union marketpower and the relatedness of cross-border merger activity are critical in determining which effect dominates.

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Section: Background Literaturementioning

confidence: 99%

Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

et al. 2014

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“…The common fear is that market integration improves the outside opportunities of firm owners and hence limits the possibility of workers to skim a fair share of the rents arising from economic activity (OECD, 2007). This issue has been prominently discussed in a large literature that addresses union wage setting in an international oligopoly (see, e.g., Mezzetti and Dinopoulos, 1991;Naylor, 1998;Lommerud, Meland, and Sørgard, 2003). However, the focus of this literature is on rent sharing at the firm or industry level, while there is no discussion on how trade affects the economy-wide distribution of profit and wage income, an issue that is of primary interest for policy makers who are concerned about the impact of trade on inequality and social justice (Bernanke, 2007;OECD, 2007).…”

Section: Introductionmentioning

confidence: 99%

The impact of trade on employment, welfare, and income distribution in unionized general oligopolistic equilibrium

Egger

Etzel

2012

European Economic Review

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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. This paper sets up a general oligopolistic equilibrium model with unionized labor markets. By accounting for productivity differences, the model features profit and wage differentials across industries. We use this setting to study the impact of trade liberalization on employment, welfare, and the distribution of income. In particular, we show that a movement from autarky to free trade with a symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether firms can extract a larger share of rents in the open economy depends on the competitive environment as well as on the degree of centralization in union wage setting. Finally, the distribution of profit income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade. Terms of use: Documents inJEL-Code: F12, F16, J51, L13.

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“…This leads to higher labor demand -which the union manages to translate both to higher wages and more jobs. Lommerud, Meland and Sørgard (2003) present a model where the foreign country is a nonunionized low-cost producer and where the firm can move production out of the country, partly or fully. They warn that the picture then becomes more complex, but there is a tendency that unionized workers can suffer from globalization -and that job losses rather than wage cuts is the likely result.…”

Section: Introductionmentioning

confidence: 99%

Can deunionization lead to international outsourcing?

Lommerud

Meland

Straume

2009

Journal of International Economics

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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.

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Unionised Oligopoly, Trade Liberalisation and Location Choice

Cited by 115 publications

References 28 publications

Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

The impact of trade on employment, welfare, and income distribution in unionized general oligopolistic equilibrium

Can deunionization lead to international outsourcing?

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