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Can Deunionization Lead to International Outsourcing?

33 Pages Posted: 24 Oct 2005  

Kjell Erik Lommerud

University of Bergen - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Frode Meland

University of Bergen - Department of Economics

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2005

Abstract

We analyze unionized firms' incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining inhouse production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization - interpreted as either market integration or increased product market competition - will increase incentives for international outsourcing.

Keywords: international outsourcing, deunionization, globalization

JEL Classification: F16, J51, L24

Suggested Citation

Lommerud, Kjell Erik and Meland, Frode and Straume, Odd Rune, Can Deunionization Lead to International Outsourcing? (September 2005). CESifo Working Paper Series No. 1545. Available at SSRN: https://ssrn.com/abstract=832984

Kjell Erik Lommerud

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen
Norway
+47 5 558 9209 (Phone)
+47 5 558 9210 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Frode Meland

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen
Norway
+47 5 558 9230 (Phone)
+47 5 558 9210 (Fax)

Odd Rune Straume (Contact Author)

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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