The Location of Firms in Unionized Countries

TY - JOUR

T1 - The Location of Firms in Unionized Countries

AU - Munch, Jakob Roland

N1 - JEL classification: F15, J51, R11

PY - 2003

Y1 - 2003

N2 - This paper develops a two-country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is shown that if the bargaining power of unions differs across countries then, as trade costs are reduced, the country with relatively weak unions gradually acquires all firms. However, for a range of trade costs, it is also a locally stable equilibrium for all firms to locate in the country with strong unions

AB - This paper develops a two-country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is shown that if the bargaining power of unions differs across countries then, as trade costs are reduced, the country with relatively weak unions gradually acquires all firms. However, for a range of trade costs, it is also a locally stable equilibrium for all firms to locate in the country with strong unions

U2 - 10.1111/1467-9442.00004

DO - 10.1111/1467-9442.00004

M3 - Journal article

SN - 0347-0520

VL - 105

SP - 49

EP - 71

JO - Scandinavian Journal of Economics

JF - Scandinavian Journal of Economics

IS - 1

ER -