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Globalisation and the Effects of National Versus International Competition on the Labour Market: Theory and Evidence from Belgian Firm Level Data

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  • Hylke Vandenbussche
  • Jozef Konings

Abstract

In this paper we first develop a simple theoretical framework which shows that important differences exist between national and international competition and their effect on national labour markets. National competition refers to a reduction of monopoly power in the product market through improved market contestability and market access, which is the responsibility of competition authorities. International competition refers to a reduction in product market competition as a result of trade liberalization. We show that when the domestic market is unionized, national entry (FDI or domestic entry) has very different effects on the national labour market than international entry (imports in the relevant product market). One result we obtain is that national competition need not increase domestic employment while trade competition need not lower domestic employment. Our analysis has at least two important implications. First, geographic location of competitors matters when institutional settings like trade unions are country specific. Second, a change in competition policy is likely to affect labour markets differently than a change in trade policy. The results also indicate that apart from location, market structure and the level at which wages are bargained over (firm or sector level) matter. In a further step the theoretical predictions we derive, are tested on Belgian company accounts data supplemented with data from a postal survey.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 21 (1998)
Issue (Month): 8 (November)
Pages: 1151-1177

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Handle: RePEc:bla:worlde:v:21:y:1998:i:8:p:1151-1177

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Cited by:
  1. J Peter Neary, 2001. "Foreign Competition and Wage Inequality," Working Papers 200102, School Of Economics, University College Dublin.
  2. Neary, J Peter, 2001. "Competition, Trade and Wages," CEPR Discussion Papers 2732, C.E.P.R. Discussion Papers.
  3. Filip Abraham & Ellen Brock, 2003. "Sectoral employment effects of trade and productivity in Europe," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 223-238.
  4. Weiss, Pia & Wälde, Klaus, 2001. "Globalisation is good for you: Distributional effects of mergers caused by globalisation," Dresden Discussion Paper Series in Economics 07/01, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  5. Collie, D. & Vandenbussche, H., 1999. "Trade, FDI and Unions," Discussion Paper 1999-42, Tilburg University, Center for Economic Research.

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