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Unions, competition and international trade in general equilibrium

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  • Bastos, Paulo
  • Kreickemeier, Udo

Abstract

We develop a two-country, multi-sector model of oligopoly in which unionised and non-unionised sectors interact in general equilibrium. The model is used to study the impact of trade liberalisation, deunionisation and firm entry on wages in unionised and non-unionised sectors, and on welfare. We find that a shift from autarky to free trade increases non-union wages and welfare, whereas the effect on union wages is ambiguous. We also show that partial deunionisation leads to higher wages in both unionised and non-unionised sectors, but only increases welfare when the proportion of unionised sectors is sufficiently low. Finally, wages in non-unionised sectors necessarily increase with firm entry, while the response of union wages and welfare depends on the trade regime.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 79 (2009)
Issue (Month): 2 (November)
Pages: 238-247

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Handle: RePEc:eee:inecon:v:79:y:2009:i:2:p:238-247

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Trade unions Product market competition General oligopolistic equilibrium Trade liberalisation;

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References

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  1. Huizinga, H.P., 1993. "International market integration and union wage bargaining," Open Access publications from Tilburg University urn:nbn:nl:ui:12-155144, Tilburg University.
  2. Kjell Erik Lommerud & Frode Meland & Lars Sørgard, 2002. "Unionized Oligopoly, Trade Liberalization and Location Choice," CESifo Working Paper Series 777, CESifo Group Munich.
  3. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
  4. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, 03.
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  6. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  7. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
  8. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-59, May-June.
  9. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  10. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
  11. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Globalisation and union opposition to technological change," Working Papers in Economics 01/05, University of Bergen, Department of Economics.
  12. Munch, Jakob Roland & Skaksen, Jan Rose, 2002. " Product Market Integration and Wages in Unionized Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(2), pages 289-99, June.
  13. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
  14. Jan Rose SØRENSEN, 1993. "Integration of Product Markets when Labour Markets are Unionized," Discussion Papers (REL - Recherches Economiques de Louvain) 1993044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  15. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  16. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
  17. Straume, Odd Rune, 2003. "International mergers and trade liberalisation: implications for unionised labour," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 717-735, May.
  18. Naylor, Robin, 1999. "Union Wage Strategies and International Trade," Economic Journal, Royal Economic Society, vol. 109(452), pages 102-25, January.
  19. Neary, J Peter, 1978. "Dynamic Stability and the Theory of Factor-Market Distortions," American Economic Review, American Economic Association, vol. 68(4), pages 671-82, September.
  20. Johnson, Harry G & Mieszkowski, Peter, 1970. "The Effects of Unionization on the Distribution of Income: A General Equilibrium Approach," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 539-61, November.
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