Strategic investment and international outsourcing in unionised oligopoly

D. Leahy, Catia Montagna

    Research output: Contribution to journalArticle

    4 Citations (Scopus)

    Abstract

    We develop an oligopoly model in which firms facing unionised domestic labour markets choose between producing an intermediate good in-house and outsourcing it to a non-unionised foreign supplier that makes a relationship-specific investment in developing the intermediate. The paper sheds light on the issue of whether international outsourcing offers a means to 'escape' the power of domestic unions and on the existence of intra-industry wage dispersion. We show that outsourcing typically increases marginal costs even when it lowers union wages. Despite this, more powerful unions increase the incentive to outsource.
    Original languageEnglish
    Pages (from-to)260-269
    Number of pages10
    JournalLabour Economics
    Volume19
    Issue number2
    DOIs
    Publication statusPublished - Apr 2012

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