Unionized Wage Setting and the Location of Firms

Abstract:     
We analyze how unionized wage setting affects the location of firms. We find that the degree of 'centralization' (at firm or sectoral level) and 'regionalization' (at regional or supra-regional level) is crucial. We show that wage setting at the firm level is the best policy to attract firms when trade costs are low, while wage setting at a more centralized level is most effective to attract firms when trade costs are high. Moreover, wage setting at the supra-regional level is beneficial for the already more agglomerated region and hurts the peripheral region.

Number of Pages in PDF File: 33

Keywords: location, unions, regionalization, centralization

JEL Classification: J51, R12, R3, F12

working papers series