Strategic Investment and International Outsourcing In Unionised Oligopoly

Dermot Leahy and Catia Montagna

Discussion Papers from University of Nottingham, GEP

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 nonunionised 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)
Date: 2011
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https://www.nottingham.ac.uk/gep/documents/papers/2011/11-18.pdf (application/pdf)

Related works:
Journal Article: Strategic investment and international outsourcing in unionised oligopoly (2012)
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:not:notgep:11/18

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