Open AccessUnionisation and Foreign Direct Investment: Challenging Conventional Wisdom?
Author(s) -
Leahy Dermot,
Montagna Catia
Publication year - 2000
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/1468-0297.00522
Subject(s) - centralisation , foreign direct investment , wage , incentive , welfare , competition (biology) , product market , economics , product (mathematics) , international economics , labour economics , market economy , business , macroeconomics , ecology , geometry , mathematics , biology
This paper investigates the effects of different degrees of wage setting centralisation on the incentive of a MNE to locate in a host country, and on the host country's welfare. Decentralised and centralised wage bargaining are considered. The nature of product market competition between the MNE and domestic firms proves crucial to results which cast doubt on some of the conventional wisdom on FDI. In particular, we show that: (i) it is not always welfare improving to attract inward FDI, and (ii) the MNE may prefer centralised to decentralised wage setting regimes.