Foreign direct investment, unionised labour markets and welfare

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

  • Jiyun Cao
  • Arijit Mukherjee

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)330-339
Journal / PublicationInternational Review of Economics and Finance
Volume58
Online published14 Apr 2018
Publication statusPublished - Nov 2018

Abstract

Although empirical evidence on the relationship between labour union and foreign direct investment (FDI) is mixed, the theoretical literature mainly explains the negative relationship between labour union and FDI. We show that a multinational firm may prefer FDI in the presence of labour unions if it is sufficiently technologically superior to its domestic counterpart. FDI (compared to export) makes the domestic labour union better off but it makes the consumers, the domestic firm, the foreign labour union and the foreign country worse off, and may reduce domestic welfare. We show the implications of industry-wide and firm-specific labour unions.

Research Area(s)

  • Foreign direct investment, Labour union, Welfare