On Footloose Industries and Labor Disputes with Endogenous Information Asymmetry

If capital becomes internationally mobile but labor does not, are outcomes of labor disputes tilted in favor of workers or employers? In this paper, we show that the answer depends critically on how the information structure of the dispute changes endogenously with capital mobility, and in addition,...

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Bibliographic Details
Published in:Review of development economics 2013-05, Vol.17 (2), p.319-341
Main Authors: Chau, Nancy H., Kanbur, Ravi
Format: Article
Language:English
Subjects:
Development economics
Labor disputes
Labor relations
Studies
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Summary:If capital becomes internationally mobile but labor does not, are outcomes of labor disputes tilted in favor of workers or employers? In this paper, we show that the answer depends critically on how the information structure of the dispute changes endogenously with capital mobility, and in addition, whether international investment incentives selectively favor the outflow of capital from the most or the least productive firms. In doing so, this paper brings together three strands of literature that are not often seen together—incentive compatible contracting, wage and unemployment outcomes of labor disputes, and international capital mobility with heterogeneous firms.
ISSN:1363-6669
1467-9361
DOI:10.1111/rode.12034