Working Paper: CEPR ID: DP6998
Authors: Kjell Erik Lommerud; Frode Meland; Odd Rune Straume
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 in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical conciliation 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: Deunionization; Globalization; International Outsourcing
JEL Codes: F16; J51; L24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deunionization (J51) | Increased International Outsourcing (F69) |
| Stronger Unions (J51) | Decreased International Outsourcing (F69) |
| Increased Globalization (F69) | Increased International Outsourcing (F69) |
| Deunionization (J51) | Decreased International Outsourcing (F69) |