The offshoring threat and wage negotiations: Theory and evidence

Abstract

This study examines the existence of the offshoring threat on wage rate using plant-level data. To do so, we construct a simple version of the traditional collective wage-bargaining model to consider the offshoring threat. Based on theoretical predictions of the threat effect, we examine evidence of the offshoring threat using plant-level data from South Korea and the endogenous switching regression model. The estimated results in our empirical study strongly suggest that the offshoring threat may exist.