Does Unionization Rate Accelerate Flight of Capital?: Panel Analysis

Authors : Cuneyt Koyuncu, İsmail Hakkı İşcan

Pages : 13-22

Doi:10.18037/ausbd.552494

View : 22 | Download : 13

Publication Date : 2018-09-25

Article Type : Research Paper

Abstract :p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Minion Pro'; min-height: 14.0px} p.p2 {margin: 0.0px 0.0px 0.0px 0.0px; text-align: justify; line-height: 10.1px; font: 10.0px 'Minion Pro'; color: #2d2829} span.s1 {font: 12.0px 'Minion Pro'; color: #000000} Economic stability, political stability, market structure, market size, trade openness, and various regulations related to tax advantages have crucial importance to attract foreign direct investments (FDI) to an economy. In addition to the factor aforementioned, One of the other potential determinants for foreign direct investments (FDI) inflow might be the degree of unionization tendency in a particular host country. As unionization causes increase in the wages and brings some fringe benefits to labors which are extra financial burdens for employers, the profit of an enterprise reduces. Owing to this fact, willingness to invest of entrepreneurs diminishes and right after they may redirect their investment to abroad. Therefore, unionization rate may discourage investors and speed up the capital flight. This study investigates the association between unionization rate and capital outflow by using panel data. Our prior expectation is a positive relationship between unionization rate and capital flight. The findings obtained in the literature show that unions, always act in the favor of protective policies, resisted against policies which support both free trade and FDI.  
Keywords : Trade unions, Unionization Rate, Foreign Direct Investment