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The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium

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  • Hartmut Egger
  • Daniel Etzel

Abstract

This paper sets up a general oligopolistic equilibrium model with unionized labor markets. By accounting for productivity di erences, the model features pro t and wage di erentials across industries. We use this setting to study the impact of trade liberalization on employment, welfare, and the distribution of income. In particular, we show that a movement from autarky to free trade with a symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether rms can extract a larger share of rents in the open economy depends on the competitive environment as well as on the degree of centralization in union wage setting. Finally, the distribution of proft income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade.

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File URL: http://www.bgpe.de/texte/DP/088_egger.pdf
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Bibliographic Info

Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 088.

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Length: 33 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:bav:wpaper:088_egger

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Keywords: General oligopolistic equilibrium; Unionized labor market; Trade liberalization; Income distribution;

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Citations

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Cited by:
  1. Felbermayr, Gabriel & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2012. "International trade and collective bargaining outcomes : evidence from German employer-employee data," IAB Discussion Paper 201207, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Mariam Camarero & Gaetano D’Adamo & Cecilio Tamarit, 2014. "The role of Institutions in explaining wage determination in the Euro Area: a panel cointegration approach," Working Papers, Department of Applied Economics II, Universidad de Valencia 1407, Department of Applied Economics II, Universidad de Valencia.
  3. Rudy Colacicco, 2013. "Strategic Trade Policy in General Oligopolistic Equilibrium," FIW Working Paper series, FIW 126, FIW.
  4. Hartmut Egger & Daniel Etzel, 2012. "Union Wage Setting and International Trade," CESifo Working Paper Series 3929, CESifo Group Munich.
  5. Ioana Veronica ALEXA & Simona Valeria TOMA & Daniela Ancuţa SARPE, 2013. "Strategic Investment and Trade in an Oligopolistic Setting," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 5-10.
  6. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.

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