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Title:Foreign Direct Investment, Labour Market Regulation and Self-Interested Governments PDF Logo
Authors:Palokangas, Tapio
Issue Date:2003
Series/Report no.:IZA Discussion paper series 793
Abstract:This document examines foreign direct investment (FDI) when multinationals and labour unions bargain over labour contracts and lobby the self-interested government for taxation and labour market regulation. We demonstrate that right-to-manage bargaining predicts higher returns for FDI than does non-unionization or efficient bargaining. This advantage is further magnified in the presence of credible wage contracts. When the labour market is nonunionized, or there is a bargain over employment, the ruling elite reaps the surplus of FDI through taxation or regulation. In the absence of credible contracts, unions have incentives to claim a bigger share of the revenue of FDI.
Subjects:foreign direct investment
labour market regulation
lobbying
JEL:D78
J51
F23
F21
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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