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Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards

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  • Dermot Leahy
  • Catia Montagna

Abstract

This paper analyses the welfare implications for a developing country of using union legalisation as a policy instrument to attract inward foreign direct investment. While its presence may discourage a foreign multinational (MNE) from locating in the host country, unionisation is an important rent-extracting instrument for the host country. We show that if the MNE benefits from dynamic effects, the host country government may have an incentive to adopt temporary social dumping: banning the union in the short run to extract higher rents in the future. However, if the government can use a fiscal instrument in conjunction with union legalisation, the former can circumvent the need to engage in social dumping.

Suggested Citation

  • Dermot Leahy & Catia Montagna, 2001. "Temporary social dumping, union legalisation and FDI: a note on the strategic use of standards," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(3), pages 243-259.
    • Handle: RePEc:taf:jitecd:v:9:y:2001:i:3:p:243-259
    DOI: 10.1080/09638190050086168
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    References listed on IDEAS

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    1. Srinivasan, T-N, 1996. "Trade and Human Rights," Papers 765, Yale - Economic Growth Center.
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    Citations

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    Cited by:

    1. Dermot Leahy & Catia Montagna, 2005. "Union Bargaining Power, Social Dumping, and Foreign Direct Investment," International Trade 0510001, University Library of Munich, Germany.
    2. Dewit, Gerda & Görg, Holger & Montagna, Catia, 2003. "Should I Stay or Should I Go? A Note on Employment Protection, Domestic Anchorage, and FDI," IZA Discussion Papers 845, Institute of Labor Economics (IZA).
    3. Gerda Dewit & Holger Görg & Catia Montagna, 2009. "Should I stay or should I go? Foreign direct investment, employment protection and domestic anchorage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 93-110, April.
    4. Dermot Leahy & Catia Montagna, 2005. "Union legislation and export platform FDI," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 437-452.

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    More about this item

    Keywords

    Multinationals; Social Dumping; Labour Standards;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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