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International Competition and the Unionized Sector

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  • Gene M. Grossman

Abstract

This paper studies the wage and employment behavior of a unionized sector that is confronted by an intensification of international competition. After developing a formal model of a monopoly union subject to majority rule, I study the response of a unionized sector operating under a seniority rule for layoffs and rehires to a trend decrease in the international price of its output. Conditions are provided to validate the casual argument that majority voting in unions and the seniority system together provide an explanation for the lack of union wage adjustment. A modified version of the model allows the job queue to deviate from a strict seniority ranking. In this context I ask, what importance can be attached to the seniority system in determining the wage response to international competition?

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 17 (1984)
Issue (Month): 3 (August)
Pages: 541-56

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Handle: RePEc:cje:issued:v:17:y:1984:i:3:p:541-56

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References

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  1. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  2. Hall, Robert E & Lilien, David M, 1979. "Efficient Wage Bargains under Uncertain Supply and Demand," American Economic Review, American Economic Association, vol. 69(5), pages 868-79, December.
  3. Bhagwati, Jagdish N & Srinivasan, T N, 1974. "On Reanalyzing the Harris-Todaro Model: Policy Rankings in the Case of Sector-Specific Sticky Wages," American Economic Review, American Economic Association, vol. 64(3), pages 502-08, June.
  4. Srinivasan, T. N. & Bhagwati, Jagdish, 1975. "Alternative policy rankings in a large, open economy with sector-specific, minimum wages," Journal of Economic Theory, Elsevier, vol. 11(3), pages 356-371, December.
  5. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  6. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  7. Calvo, Guillermo A, 1978. "Urban Employment and Wage Determination in LDC's: Trade Unions in the Harris-Todaro Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(1), pages 65-81, February.
  8. John M. Abowd & Henry S. Farber, 1982. "Job queues and the union status of workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(3), pages 354-367, April.
  9. Richard B. Freeman, 1980. "Unionism and the dispersion of wages," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(1), pages 3-23, October.
  10. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  11. Farrell Bloch & Mark S. Kuskin, 1978. "Wage determination in the union and nonunion sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
  12. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
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Citations

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Cited by:
  1. Jorge Saba Arbache, 1999. "Trade Liberalisation and Insider Power: The Case of Brazil," Studies in Economics 9902, Department of Economics, University of Kent.
  2. Francois, Joseph & Grier, Kevin Blaine & Nelson, Douglas, 2004. "Globalization, Roundaboutness and Relative Wages," CEPR Discussion Papers 4406, C.E.P.R. Discussion Papers.
  3. Chi-Hsin Wu & Chia-Ying Liu, 2010. "Do Trade Unions Deteriorate International Competitiveness? Reconciliation of the Discrepancy Between Theory and Practice," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(2), pages 145-155, June.
  4. Fredriksson, Per G. & Gaston, Noel, 1999. "The "greening" of trade unions and the demand for eco-taxes," European Journal of Political Economy, Elsevier, vol. 15(4), pages 663-686, November.
  5. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers 3877, C.E.P.R. Discussion Papers.
  6. James A. Brander & Barbara J. Spencer, 1986. "International Oligopoly and Asymmetric Labour Market Institutions," NBER Working Papers 2038, National Bureau of Economic Research, Inc.
  7. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  8. Prachi Mishra & Utsav Kumar, 2005. "Trade Liberalization and Wage Inequality," IMF Working Papers 05/20, International Monetary Fund.
  9. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
  10. Robert Feenstra, 2004. "Estimating The Effects Of Trade Policy," Working Papers 9510, University of California, Davis, Department of Economics.
  11. Jeffrey Sachs, 1986. "High Unemployment in Europe: Diagnosis and Policy Implications," NBER Working Papers 1830, National Bureau of Economic Research, Inc.
  12. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
  13. Joseph Francois & Kevin Grier & Douglas Nelson, 2004. "Globalization, Roundaboutness, and Relative Wages," Tinbergen Institute Discussion Papers 04-021/2, Tinbergen Institute.
  14. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
  15. Gaston, Noel & Trefler, Daniel, 1995. "Union wage sensitivity to trade and protection: Theory and evidence," Journal of International Economics, Elsevier, vol. 39(1-2), pages 1-25, August.

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