We are grateful to seminar participants at the Midwest International Economics Group Meeting, Cornell University, University of Cambridge, and an anonymous referee for useful comments and suggestions.
On Footloose Industries and Labor Disputes with Endogenous Information Asymmetry
Article first published online: 19 APR 2013
© 2013 Blackwell Publishing Ltd
Review of Development Economics
Volume 17, Issue 2, pages 319–341, May 2013
How to Cite
Chau, N. H. and Kanbur, R. (2013), On Footloose Industries and Labor Disputes with Endogenous Information Asymmetry. Review of Development Economics, 17: 319–341. doi: 10.1111/rode.12034
- Issue published online: 19 APR 2013
- Article first published online: 19 APR 2013
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.