Rent Sharing with Footloose Production. Foreign Ownership and Wages Revisited.

Abstract

We present a bargaining model of wage and employment determination, where we show that foreign acquisitions might hurt the bargaining outcome of powerful unions by giving the firm a credible threat to move production abroad. Using detailed data on firms and workers in manufacturing, including information on union membership and foreign ownership, we find, in line with the predictions of our model, that foreign acquisitions negatively impact the outcome of workers in highly unionized plants.