Global Firms, (de)unionization and Wage Inequality

Abstract

AbstractThis paper studies the simultaneous effects of relocation of production (as part of globalization) and institutions on intra- and inter-country wage inequality. Firstly, empirical evidence shows that labor unions act at decreasing inequality, but this shrinking effect tends to be mitigated by globalization. Theoretically, we study the conditions under which this empirical evidence is verified. Unskilled labor-intensive relocations together with (de)unionization processes of the labor force contributed to the increasing path of intra-country wage inequality observed in some of the leading countries. However, most recently, skilled relocations may help to decrease intra-country inequality in leading countries (e.g., the US), but to increase it in follower countries (e.g., China).