Does Internationalization Affect Union Bargaining Power? An Empirical Study for Five EU Countries

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