Flexibility in wage setting under the threat of relocation

Anna Goeddeke, Justus Haucap, Annika Herr and Christian Wey

No 269, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: Relocation of production to countries with low labour cost have induced increased labour market flexibility, which has been praised as a silver bullet for economic growth and low unemployment. Within a unionised oligopoly framework, in which a multi-national firm has the option to relocate its production to a foreign country, we analyse the welfare implications of both centralised and flexible wage setting regimes. For very low foreign wages, wage flexibility leads to higher welfare than a rigid centralised regime. In contrast, for 'intermediate' wage levels in the foreign country, an industry-wide uniform wage leads to higher social welfare than flexible wages.

Keywords: Union; Centralised Wage; Wage Flexibility; Relocation; Labour Market Flexibility (search for similar items in EconPapers)
JEL-codes: F23 J51 L13 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/168580/1/898417953.pdf (application/pdf)

Related works:
Journal Article: Flexibility in Wage Setting Under the Threat of Relocation (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:269

Access Statistics for this paper

More papers in DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().