On Footloose Industries, Asymmetric Information and Wage Bargaining

20 Pages Posted: 11 Dec 2003

See all articles by Nancy H. Chau

Nancy H. Chau

Cornell University - School of Applied Economics and Management; IZA Institute of Labor Economics

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: October 2003

Abstract

If capital becomes internationally mobile but labor does not, is the bargaining outcome for workers worsened? In this paper, we show that the answer to this question depends critically on the information structure of the bargaining process. In particular, we demonstrate a hitherto underappreciated informational role of capital mobility in determining the distribution of output between workers and employers. In doing so we bring together three strands of literature not often seen together - incentive compatible contracting, union-employer bargaining, and the consequences of capital mobility.

Keywords: Foreign direct investment, bargaining under asymmetric information, union wage, employment

JEL Classification: D8, F2, J5

Suggested Citation

Chau, Nancy H. and Kanbur, Ravi, On Footloose Industries, Asymmetric Information and Wage Bargaining (October 2003). CEPR Discussion Paper No. 4095. Available at SSRN: https://ssrn.com/abstract=477981

Nancy H. Chau

Cornell University - School of Applied Economics and Management ( email )

Ithaca, NY 14853
United States
607-255-4463 (Phone)
607-255-9984 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ravi Kanbur (Contact Author)

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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