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An interesting finding of recent research is that strategic considerations and collective bargaining structures often influence foreign direct investment. In this paper, I argue that union support for the decentralisation of collective bargaining may be an optimal response to the growing global nature of the firms that employ their members. I show that unions prefer a more wage-oriented bargaining posture if their members are faced with a greater outsourcing threat. The model is able to rationalise the empirically insignificant effects of outsourcing on wages. The findings are also consistent with the growing wage inequality and falling union membership that some countries have experienced since implementing more decentralised forms of collective bargaining.

The Effects of Globalisation on Unions and the Nature of Collective Bargaining