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Vertical differentiation, wage bargaining and intra-industry trade liberalization

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  • BACCHIEGA, Emanuele

Abstract

This article analyzes the effects of trade liberalization between two asymmetric industries. Asymmetries concern consuemers' masses and labor endowments. The latter, together with human capital specificity in the production of the variants of a vertically differentiated good, determine market form and the range of products available in each industry. We show that market integration benefits or harms the agents in the industries following on industry-specific parameters. As the conditions on gains and losses from trade are independent between countries, bilateral losses from trade can emerge at equilibrium.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004028.

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Date of creation: 00 May 2004
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Handle: RePEc:cor:louvco:2004028

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Related research

Keywords: vertical differentiation; workers’ skills; wage bargaining; trade liberalization; industry asymmetries;

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References

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  1. Joan Martín-Montaner & Vicente Ríos, 2002. "Vertical specialization and intra-industry trade: The role of factor endowments," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 340-365, June.
  2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  3. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(2), pages 249-55.
  4. Motta, M., 1991. "Sunk costs and trade liberalisation," CORE Discussion Papers 1991027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. De Fraja, Giovanni, 1996. "Product line competition in vertically differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 389-414, May.
  6. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  7. Anderson, Simon P & Donsimoni, M-P & Gabszewicz, J J, 1989. "Is International Trade Profitable to Oligopolistic Industries?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 725-33, November.
  8. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  9. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
  10. Gabszewicz, Jean Jaskold, et al, 1981. "International Trade in Differentiated Products," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 527-34, October.
  11. Greenaway, David & Torstensson, Johan, 2000. "Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 260-280.
  12. Jean Gabszewicz & Alessandro Turrini, 1999. "Workers' Skills and Product Selection," Revue Économique, Programme National Persée, vol. 50(3), pages 383-391.
  13. Emanuele Bacchiega, 2007. "Wage bargaining and vertical differentiation," International Review of Economics, Springer, vol. 54(1), pages 35-52, March.
  14. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
  15. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
  16. Cabrales, Antonio & Motta, Massimo, 2001. "Country asymmetries, endogenous product choice and the timing of trade liberalization," European Economic Review, Elsevier, vol. 45(1), pages 87-107, January.
  17. repec:fth:louvco:9906 is not listed on IDEAS
  18. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  19. Naylor, Robin, 1997. "Union Wage Strategies and International Trade," The Warwick Economics Research Paper Series (TWERPS) 480, University of Warwick, Department of Economics.
  20. Webster, Allan, 1993. "The Skill and Higher Educational Content of UK Net Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 141-59, May.
  21. Alessandro Turrini, 2000. "High-quality bias in vertically differentiated oligopolies—a note on skills, trade, and welfare," Journal of Economics, Springer, vol. 71(2), pages 133-147, June.
  22. 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.
  23. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
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