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Discussion Paper Details

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Title: Can Deunionization Lead to International Outsourcing?

Author(s): Kjell Erik Lommerud, Frode Meland and Odd Rune Straume

Publication Date: October 2008

Keyword(s): Deunionization, Globalization and International outsourcing

Programme Area(s): International Trade and Regional Economics and Public Economics

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.

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Bibliographic Reference

Lommerud, K, Meland, F and Straume, O. 2008. 'Can Deunionization Lead to International Outsourcing?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6998