Threat Effect of Foreign Direct Investment on Labor Union Wage Premium

PERI Working Paper No. 27

37 Pages Posted: 10 Nov 2003

See all articles by Minsik Choi

Minsik Choi

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics

Date Written: 2001

Abstract

This paper explores the impact of 'threat effects' of foreign direct investment on labor markets in the United States. In this context, the term 'threat effect' refers to the use by employers of the implicit or explicit threat that they will move all or part of their production to a different location, even if they do not actually do so. In this paper, I construct a unique industry level panel data set and I show that the union wage premium has been negatively associated with the stock of outward FDI in the U.S. manufacturing sector for the period of 1983-1996. The union wage premium is chosen as the dependent variable to test the hypothesis that the increased capital mobility changes the nature of bargaining between workers and employers as predicted in threat effect theory.

Suggested Citation

Choi, Minsik, Threat Effect of Foreign Direct Investment on Labor Union Wage Premium (2001). PERI Working Paper No. 27, Available at SSRN: https://ssrn.com/abstract=335480 or http://dx.doi.org/10.2139/ssrn.335480

Minsik Choi (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

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