Unionisation and foreign direct investment: challenging conventional wisdom?

Dermot Leahy, Catia Montagna

Research output: Contribution to journalArticle

Abstract

This paper investigates the effects of different degrees of wage setting centralisation on (1) the incentive of a MNE to locate in a host country, (2) the optimal level of investment it decides to commit to its foreign operation, and (3) the host country?s welfare. Decentralised and centralised wage bargaining are considered. The nature of product market competition between the MNE and domestic firms affects results which cast doubt on some of the conventional wisdom on FDI. In particular, we show that: (i) it is not always welfare improving to attract inward FDI, and (ii) the MNE may prefer centralised to decentralised wage setting regimes.
Original languageEnglish
Pages (from-to)80-92
Number of pages13
JournalEconomic Journal
Volume110
Issue number462
DOIs
Publication statusPublished - Mar 2000

Keywords

  • FDI Unionisation Strategic behaviour

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