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Trade Liberalization and Union Wages in a Differentiated Bertrand Duopoly

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  • Nicole Gürtzgen

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    Abstract

    In a framework of a unionized international Bertrand duopoly with differentiated products, this article analyzes national labor market interdependencies and the consequences of trade liberalization for union wages. The analysis suggests that national wages are likely to be strategic complements (substitutes) if products are ordinary substitutes (complements). Under the assumption of linear demand, it is shown that bilateral trade liberalization always leads to higher union set wages and union utilities, regardless of the nature of product rivalry. An analysis of the consequences of unilateral tariff reductions shows that foreign tariff reductions always give rise to higher union wages and utilities, whereas the impact of unilateral domestic tariff reductions depends on the nature of product rivalry. Copyright Kluwer Academic Publishers 2002

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    File URL: http://hdl.handle.net/10.1023/A:1013921230663
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 13 (2002)
    Issue (Month): 2 (April)
    Pages: 133-151

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    Handle: RePEc:kap:openec:v:13:y:2002:i:2:p:133-151

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: trade unions; oligopoly; intraindustry trade; product market integration;

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    1. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
    2. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    3. 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.
    4. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    5. A. Jorge Padilla & Samuel Bentolila & Juan J. Dolado, 1996. "Wage Bargaining in Industries with Market Power," Banco de Espa�a Working Papers 9616, Banco de Espa�a.
    6. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
    7. 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.
    8. T. Fisher & D. Wright, 1999. "Unionized Oligopoly and Trade Liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 799-816, May.
    9. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
    10. 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.
    11. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(2), pages 249-55.
    12. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    13. Bandyopadhyay, Subhayu & Bandyopadhyay, Sudeshna C & Park, Eun-Soo, 2000. "Unionized Bertrand Duopoly and Strategic Export Policy," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 164-74, February.
    14. repec:fth:baesse:9616 is not listed on IDEAS
    15. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
    16. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
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    Cited by:
    1. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2003. "Globalisation and union opposition to technological change," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-18, Social Science Research Center Berlin (WZB).
    2. Maiti, Dibyendu & Mukherjee, Arijit, 2013. "Trade cost reduction, subcontracting and unionised wage," Labour Economics, Elsevier, vol. 21(C), pages 103-110.
    3. Andersen, Torben M. & Sørensen, Allan, 2007. "Product Market Integration and Labour Markets: Aggregate Gains at the Cost of More Inequality?," IZA Discussion Papers 2556, Institute for the Study of Labor (IZA).

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