The impact of worker bargaining power on the organization of global firms

Juan Carluccio and Maria Bas

Journal of International Economics, 2015, vol. 96, issue 1, 162-181

Abstract: Do variations in labor market institutions affect the cross-border organization of the firm? Using firm-level data on multinationals located in France, we show that firms are more likely to outsource the production of intermediate inputs to external suppliers when importing from countries with high worker bargaining power. This effect is stronger for firms operating in capital-intensive and differentiated industries. We propose a theoretical mechanism that rationalizes these findings. The fragmentation of the value chain weakens the workers' bargaining position, by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces the share of surplus that is appropriated by the union, which enhances the firm's incentives to invest. Since investment creates relatively more value in capital-intensive industries, increases in worker bargaining power are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that global firms choose their organizational structure strategically when sourcing intermediate inputs from markets where worker bargaining power is high.

Keywords: Worker bargaining power; Labor market imperfections; Outsourcing; Multinational firms (search for similar items in EconPapers)
JEL-codes: F14 F23 J5 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Related works:
Working Paper: The Impact of Worker Bargaining Power on the Organization of Global Firms (2015)
Working Paper: The Impact of Worker Bargaining Power on the Organization of Global Firms (2015)
Working Paper: The Impact of Worker Bargaining Power on the Organization of Global Firms (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:96:y:2015:i:1:p:162-181

DOI: 10.1016/j.jinteco.2014.12.008

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