Temporary Social Dumping, Union Legalisation and FDI: A Note on the Strategic Use of Standards

Dermot Leahy and Catia Montagna

No 99-08, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper analyses the welfare implications for a developing country of using union legalisation as a policy instrument to attract inward foreign direct investment. While its presence may discourage a foreign multinational (MNE) from locating in the host country, unionisation is an important rent-extracting instrument for the host country. We show that if the MNE benefits from dynamic effects, the host country government may have an incentive to adopt temporary social dumping: banning the union in the short run to extract higher rents in the future. However, if the government can use a fiscal instrument in conjunction with union legalisation, the former can circumvent the need to engage in social dumping.

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Journal Article: Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards (2001)
Working Paper: Temporary Social Dumping, Union Legalisation and FDI: a Note on the Strategic Use of Standards (2000)
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