Unionized Wage Setting and the Location of Firms
VIVES Discussion Paper No. 9
33 Pages Posted: 12 Apr 2010
Date Written: September 2009
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: Suggested Citation