Trade Unions, Wage Bargaining Coordination, and Foreign Direct Investment

18 Pages Posted: 15 Nov 2008

See all articles by Roxana Radulescu

Roxana Radulescu

University of Newcastle - Economics

Martin Robson

University of Durham


Conventional wisdom is that a high trade union bargaining strength and a system of coordinated wage bargaining reduce the attractiveness of an economy as a location for foreign direct investment, although there is limited evidence for this. The paper takes panel data for 19 OECD economies to examine the relationship between trade union bargaining strength, bargaining coordi nation, and a range of incentives for inward foreign direct investment. It finds a strong negative effect of trade union density on inward foreign direct investment, which is dependent on the degree of wage bargaining coordination. A high degree of coordination weakens the deterrent effect of high union density, which is consistent with the notion that under certain circumstances a coordinated increase in wages can increase profits of the multinationals by hurting domestic firms.

Suggested Citation

Radulescu, Roxana and Robson, Martin, Trade Unions, Wage Bargaining Coordination, and Foreign Direct Investment. LABOUR, Vol. 22, Issue 4, pp. 661-678, December 2008, Available at SSRN: or

Roxana Radulescu (Contact Author)

University of Newcastle - Economics ( email )

England NE1 7RU
United Kingdom

Martin Robson

University of Durham ( email )

Mill Hill Lane
Durham, Durham DH1 3HY
United Kingdom

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