Working Paper: CEPR ID: DP4095
Authors: Nancy H. Chau; Ravi Kanbur
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: bargaining under asymmetric information; employment; foreign direct investment; union wage
JEL Codes: D8; F2; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Capital Mobility (F20) | Elasticity of Labor Demand (J23) |
| Elasticity of Labor Demand (J23) | Bargaining Outcome for Workers (J52) |
| Capital Mobility (F20) | Spread of MVPL (L42) |
| Spread of MVPL (L42) | Informational Rent for Employers (J39) |
| Informational Rent for Employers (J39) | Bargaining Outcome for Workers (J52) |
| Capital Mobility (F20) | Informational Asymmetry (D82) |
| Informational Asymmetry (D82) | Bargaining Outcome for Workers (J52) |
| Capital Mobility (F20) | Bargaining Outcome for Workers (J52) |