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Wage subsidies and international trade: When does policy coordination pay?

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  • Sabastian Braun

    (Kiel Institute for the World Economy)

  • Christian Spielmann

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Abstract

National labour market institutions interact across national boundaries when product markets are global. Labour market policies can thus entail spill-overs, a fact widely ignored in the academic literature. This paper studies the effects of wage subsidies in an international duopoly model with unionised labour markets. We document both positive and negative spill-over effects and discuss the benefits and costs from international policy coordination both for the case of symmetric and asymmetric labour market institutions. Our results suggest that institutional differences could sign responsible for the slow speed at which labour market policy coordination has progressed so far.

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File URL: http://www.bbk.ac.uk/ems/research/wp/2010/PDFs/BWPEF1007.pdf
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Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 1007.

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Date of creation: Mar 2010
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Handle: RePEc:bbk:bbkefp:1007

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  1. Sabastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Birkbeck Working Papers in Economics and Finance 1007, Birkbeck, Department of Economics, Mathematics & Statistics.
  2. 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.
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  12. Martin Heidenreich & Gabriele Bischoff, 2008. "The Open Method of Co-ordination: A Way to the Europeanization of Social and Employment Policies?," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 497-532, 06.
  13. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
  14. Andreas HaufLer & Guttorm Schjelderup & Frank Stähler, 2005. "Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base," International Tax and Public Finance, Springer, vol. 12(3), pages 281-300, May.
  15. Fredriksson, Peter & Holmlund, Bertil, 2005. "Optimal unemployment insurance design: time limits, monitoring, or workfare?," Working Paper Series 2005:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  16. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  17. Haufler, Andreas & Pflüger, Michael, 2007. "International oligopoly and the taxation of commerce with revenue-constrained governments," Munich Reprints in Economics 20424, University of Munich, Department of Economics.
  18. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  19. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323, October.
  20. Olaf van Vliet & Ferry Koster, 2011. "Europeanization and the Political Economy of Active Labour Market Policies," European Union Politics, , vol. 12(2), pages 217-239, June.
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Cited by:
  1. Sabastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Birkbeck Working Papers in Economics and Finance 1007, Birkbeck, Department of Economics, Mathematics & Statistics.

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