Unionized Wage Setting and the Location of Firms

VIVES Discussion Paper No. 9

33 Pages Posted: 12 Apr 2010

See all articles by Karolien De Bruyne

Karolien De Bruyne

KU Leuven - Center for Economic Studies

Date Written: September 2009

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.

Keywords: location, unions, regionalization, centralization

JEL Classification: J51, R12, R3, F12

Suggested Citation

De Bruyne, Karolien, Unionized Wage Setting and the Location of Firms (September 2009). VIVES Discussion Paper No. 9, Available at SSRN: https://ssrn.com/abstract=1586768 or http://dx.doi.org/10.2139/ssrn.1586768

Karolien De Bruyne (Contact Author)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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