33 Pages Posted: 24 Oct 2005
Date Written: September 2005
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: 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