Foreign Direct Investment and Wage Bargaining

CSGR Working Paper No. 41/99

28 Pages Posted: 15 Feb 2000

See all articles by Robin Naylor

Robin Naylor

University of Warwick - Department of Economics

Michele Santoni

University of Milan - Department of Business Policy and Economics

Date Written: October 1999

Abstract

We derive the sub-game perfect Nash equilibria for the foreign direct investment (FDI) game played between two unionised firms. Among other results, we show that FDI is less likely, ceteris paribus, the greater is union bargaining power, the stronger the weight the union attaches to wages, and the more substitutable are firms? products in the potential host country. We derive results concerning the conditions under which FDI will be reciprocal. We also examine conditions under which the FDI game between firms will possess the characteristics of a Prisoners? Dilemma. Finally, we consider the possibility that firms might delegate wage determination to unions as a method of strategic deterrence against entry by FDI.

JEL Classification: J51, L13, F12, F23

Suggested Citation

Naylor, Robin A. and Santoni, Michele, Foreign Direct Investment and Wage Bargaining (October 1999). CSGR Working Paper No. 41/99, Available at SSRN: https://ssrn.com/abstract=202235 or http://dx.doi.org/10.2139/ssrn.202235

Robin A. Naylor (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Michele Santoni

University of Milan - Department of Business Policy and Economics ( email )

Milano, I-20122
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
143
Abstract Views
1,482
rank
232,571
PlumX Metrics