Strategic investment and international outsourcing in unionised oligopoly

Dermot Leahy and Catia Montagna

Labour Economics, 2012, vol. 19, issue 2, 260-269

Abstract: We develop an oligopoly model in which firms facing unionised domestic labour markets choose between producing an intermediate good in-house and outsourcing it to a non-unionised foreign supplier that makes a relationship-specific investment in developing the intermediate. The paper sheds light on the issue of whether international outsourcing offers a means to ‘escape’ the power of domestic unions and on the existence of intra-industry wage dispersion. We show that outsourcing typically increases marginal costs even when it lowers union wages. Despite this, more powerful unions increase the incentive to outsource.

Keywords: Outsourcing; Unionisation; Wage dispersion; Strategic investment; Oligopoly (search for similar items in EconPapers)
JEL-codes: F1 J3 J5 L1 L2 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Strategic Investment and International Outsourcing In Unionised Oligopoly (2011)
Working Paper: STRATEGIC INVESTMENT AND INTERNATIONAL OUTSOURCING IN UNIONISED OLIGOPOLY (2010)
Working Paper: Strategic investment and international outsourcing in unionised oligopoly (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:19:y:2012:i:2:p:260-269

DOI: 10.1016/j.labeco.2011.11.003

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