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This paper studies the impact of foreign direct investment (FDI) on wages and employment When labor-management bargaining is industry-wide, two effects of FDI are identified; the collusion effect and the threat-point effect. It is shown that: (i) FDI always reduces the negotiated wage; (ii) FDI reduces union employment and the competitive wage if die union cares more about employment than wages or is equally concerned about employment and wages. However, if labor-mingement bargaining is firm-specific and unionization is industry-wide, then the above effects of FDI are substantially reduced.
Lihong Zhao (Wed,) studied this question.