Working Paper: CEPR ID: DP8784
Authors: Carsten Eckel; Hartmut Egger
Abstract: Multinational enterprises are able to improve their disagreement profits by setting up foreign production facilities, with adverse consequences for negotiated wages and union utilities. In this paper, we take a new angle at this issue and analyze whether unions can improve their situation by cooperating internationally. By shifting the focus from firms to unions as the active players, we aim at explaining why unions find it hard to respond to the detrimental shift in bargaining position as a result of globalization and why there is so little evidence for union cooperation within multinational production networks. Our results show that cooperation is clearly beneficial for unions if their preferences regarding wages and employment are similar across countries. If these preferences differ, however, potential production relocations by multinationals create winners and losers among unions, and these distributional effects may impede cooperation.
Keywords: International cooperation; Labour unions; Multinational enterprise; Union objectives
JEL Codes: F23; J51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cooperation among unions (J51) | bargaining advantage of MNEs (F23) |
| Cooperation among unions (J51) | higher wages for union members (J50) |
| Union preferences alignment (J58) | cooperation is beneficial (C71) |
| Divergent union preferences (J59) | cooperation may create winners and losers (C72) |
| MNEs operating in multiple countries (F23) | lower wages with local unions (J51) |
| MNEs can replace local production with imports (F23) | weaken unions' bargaining power (J58) |
| International cooperation among unions (J51) | mitigate adverse effects of globalization on wages (F66) |
| Divergent union preferences (J59) | discourage cooperation (C72) |