Unionisation and Foreign Direct Investment

Dermot Leahy and Catia Montagna

No 2260, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 that 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.

Keywords: FDI; Strategic Behaviour; Unionisation (search for similar items in EconPapers)
JEL-codes: F16 F23 (search for similar items in EconPapers)
Date: 1999-10
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Citations: View citations in EconPapers (6)

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