Does internationalization affect union bargaining power? An empirical study for five EU countries

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Abstract
In this paper, we assess the impact of international trade on union bargaining power in five EU countries, using a two-step estimation procedure. In the first step, we use firm-level data to estimate union bargaining power at sector level within a production function framework. We simultaneously test for the bargaining regime and estimate, rather than impose, union preferences. We find that a labour-hoarding regime is clearly favoured over an efficient bargaining or a right-to-manage framework. Overall, unions appear to be wage-oriented. In the second step, the bargaining power estimates are regressed on variables reflecting the level of foreign competitiveness of OECD countries and Newly Industrialized Countries (NIC), as well as on a number of other potential determinants of union power. We find a significant negative impact of internationalization on union bargaining power that is comparable in NIC and OECD countries.

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