Flexibility in Wage Setting Under the Threat of Relocation
- authored by
- Anna Goeddeke, Justus Haucap, Annika Herr, Christian Wey
- Abstract
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.
- External Organisation(s)
-
Reutlingen University
University Hospital Düsseldorf
- Type
- Article
- Journal
- Labour
- Volume
- 32
- Pages
- 1-22
- No. of pages
- 22
- ISSN
- 1121-7081
- Publication date
- 03.2018
- Publication status
- Published
- Peer reviewed
- Yes
- ASJC Scopus subject areas
- Demography, Geography, Planning and Development
- Sustainable Development Goals
- SDG 8 - Decent Work and Economic Growth
- Electronic version(s)
-
https://doi.org/10.1111/labr.12118 (Access:
Open)
