Foreign ownership and centralized collective bargaining: Direct and indirect influences

Abstract

Using firm-level data from Germany, this study examines the link between foreign ownership and the coverage by centralized (multi-employer) bargaining agreements. Conforming to theoretical considerations, the empirical analysis shows that it is important to distinguish between a direct and an indirect influence of foreign ownership on centralized collective bargaining. The direct influence of foreign ownership lowers the probability that a firm is covered by a centralized agreement. The indirect influence works through the unionization of the workforce. If the size of the firm does not exceed a critical level, the indirect influence counteracts the direct influence. Foreign ownership leads to a higher share of union members which, in turn, has a positive influence on the coverage by a centralized agreement. However, in very large firms the indirect influence appears to be negative. Foreign ownership is associated with a lower share of union members.