Wage bargaining, job loss fears and offshoring

In this paper I present a simple theoretical model where firms and trade unions negotiate over wages. Firms have the possibility to offshore parts of the ir production and trade union members have a disutility from individual job loss fears. I show that higher job loss fears result in lower wages. As a Nash bargaining result, firms can use potential but non realized offshoring as a threat to enforce lower wages. Using a large German household survey, I can show evidence that increasing potential offshoring lowers wages through high job loss fears.