Wage Bargaining and Multinational Firms in General Equilibrium

Carsten Eckel () and Hartmut Egger ()

No CESifo Working Paper No. 1711, CESifo Working Paper Series from CESifo GmbH

Abstract: This paper studies the relationship between wage negotiations and the mode of foreign market penetration in a general equilibrium framework. We analyze the incentives of firms to set up a foreign production facility for improving their bargaining position vis-à-vis local unions. This renders the allocation of bargaining power among firms and unions a key determinant of the share of multinational enterprises and exporting firms. The economic mechanisms in this paper provide novel insights on how wages and unemployment rates adjust to economic integration. We distinguish between short-run effects for a given number of competitors and long-run effects after firm entry/exit. This allows us to identify possible globalization paths and to analyze their consequences for domestic labor markets.

Keywords: multinational firms; economic integration; wage bargaining; unemployment (search for similar items in EconPapers)
JEL-codes: F12 F15 F16 F23 J51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: Written 2006
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