Employment Protection and Globalization in Dynamic Oligopoly

Dermot Leahy, Gerda Dewit and Catia Montagna

No 3871, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not. Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

Keywords: Uncertainty; Flexibility; Oligopoly; Employment protection; Foreign direct investment; Location (search for similar items in EconPapers)
JEL-codes: D80 F23 L13 (search for similar items in EconPapers)
Date: 2003-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Employment Protection and Globalisation in Dynamic Oligopoly (2003)
Working Paper: Employment protection and globalisation in dynamic oligopoly (2003)
Working Paper: Employment protection and globalisation in dynamic oligopoly (2003)
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