Strategic investment and international outsourcing in unionised oligopoly

Dermot Leahy and Catia Montagna

No 2010-19, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: We critically consider the conventional belief that the attractiveness of international outsourcing lies in cheaper labour costs overseas and that it offers a means to ‘escape’ the power of unions. We develop an oligopoly model in which firms facing unionised domestic labour market choose between producing an intermediate in-house or outsourcing it to a non-unionised foreign supplier that makes a relationship specific investment in developing the intermediate. We show that outsourcing typically results in higher wages and does not always reduce marginal costs. Trade liberalisation favours outsourcing particularly for the relatively less efficient firms.

Keywords: Outsourcing; Unionisation; Strategic Investment; Trade Liberalisation; Oligopoly (search for similar items in EconPapers)
Date: 2010
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Related works:
Journal Article: Strategic investment and international outsourcing in unionised oligopoly (2012)
Working Paper: Strategic Investment and International Outsourcing In Unionised Oligopoly (2011)
Working Paper: STRATEGIC INVESTMENT AND INTERNATIONAL OUTSOURCING IN UNIONISED OLIGOPOLY (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:151

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