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N° 2010-03 |
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| March 2010 |
| Wage Bargaining and the Boundaries of the Multinational Firm |
Maria Bas
Juan Carluccio |
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| Do variations in labor market institutions across countries affect the cross-border organization of the
firm? Using firm-level data on multinationals located in France, we show that multinational firms are
more likely to import intermediate inputs from external independent suppliers instead of importing from
their own subsidiaries when importing from countries with empowered unions. Moreover, this effect
is stronger for firms operating in capital-intensive industries. We propose a theoretical mechanism that
rationalizes these findings. The fragmentation of the value chain weakens the union’s bargaining position,
by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces
the share of surplus that is appropriated by the union, which enhances the firm’s incentives to invest.
Since investment creates relatively more value in capital-intensive industries, increases in union power
are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that
multinational firms use their organizational structure strategically when sourcing intermediate inputs
from unionized markets. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Wage bargaining; trade unions; sourcing; multinational firms |
Keywords |
| F10; J52; L22 |
JEL classification |
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