The Dilemma of Labor Unions: Local Objectives vs Global Bargaining

It is a widespread concern that multinational enterprises improve their disagreement profits by setting up foreign production facilities, with adverse consequences for negotiated wages and union utilities. In this paper, we take a new angle on this issue and analyze whether unions can improve their situation by cooperating internationally. Our results show that cooperation is clearly beneficial for unions if their preferences regarding wages and employment are similar across countries. If these preferences differ, however, potential production reallocations by multinationals create winners and losers among unions, and this may impede cooperation of unions within the multinational production network.