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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 differences, the model features profit and wage differentials 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 firms 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 profit 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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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2895.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2895

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Keywords: general oligopolistic equilibrium; unionized labor market; trade liberalization; income distribution;

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References

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Citations

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Cited by:
  1. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
  2. 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.
  3. Hartmut Egger & Daniel Etzel, 2012. "Union Wage Setting and International Trade," IAAEU Discussion Papers 201209, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  4. Gabriel J. Felbermayr & Andreas Hauptmann & Hans-Jörg Schmerer, 2012. "International Trade and Collective Bargaining Outcomes: Evidence from German Employer-Employee Data," Ifo Working Paper Series Ifo Working Paper No. 130, Ifo Institute for Economic Research at the University of Munich.
  5. 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 1407, Department of Applied Economics II, Universidad de Valencia.
  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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