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Flexibility in wage setting under the threat of relocation

  • Relocation of production to countries with low labour costs has induced increased labour market flexibility, which has been praised as a silver bullet for economic growth and low unemployment. Within a unionised oligopoly framework, in which a multinational firm has the option to relocate its production to a foreign country, we analyse the welfare implications of both centralised and flexible wage-setting regimes. For very low foreign wages, wage flexibility leads to higher welfare than a rigid centralised regime. In contrast, for ‘intermediate’ wage levels in the foreign country, an industry-wide uniform wage leads to higher social welfare than flexible wages.

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Metadaten
Author of HS ReutlingenGöddeke, Anna
DOI:https://doi.org/10.1111/labr.12118
ISSN:1121-7081
eISSN:1467-9914
Erschienen in:Labour : review of labour economics and industrial relations
Publisher:Wiley-Blackwell
Place of publication:Oxford
Document Type:Journal article
Language:English
Publication year:2018
Volume:32
Issue:1
Page Number:22
First Page:1
Last Page:22
DDC classes:650 Management
Open access?:Nein
Licence (German):License Logo  In Copyright - Urheberrechtlich geschützt