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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. Motta, Massimo, 1992. "Sunk Costs and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(412), pages 578-87, May.
  2. GABSZEWICZ, Jean & TURRINI, Alessandro, 1997. "Workers’ skills, product quality and industry equilibrium," CORE Discussion Papers 1997055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  5. 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.
  6. 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.
  7. 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.
  8. Naylor, Robin, 1999. "Union Wage Strategies and International Trade," Economic Journal, Royal Economic Society, vol. 109(452), pages 102-25, January.
  9. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  10. Greenaway, David, 1998. "Economic Geography, Comparative Advantage and Trade Within Industries: Evidence from the OECD," CEPR Discussion Papers 1857, C.E.P.R. Discussion Papers.
  11. GABSZEWICZ, Jean & TURRINI, Alessandro, 1999. "Workers’skills and product selection," CORE Discussion Papers 1999006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
  13. Jaskold Gabszewicz, J. & Shaked, A. & Sutton, J. & Thisse, J.-F., . "International trade in differentiated products," CORE Discussion Papers RP -463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. 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.
  15. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  16. 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.
  17. 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.
  18. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  19. 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.
  20. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
  21. De Fraja, Giovanni, 1996. "Product line competition in vertically differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 389-414, May.
  22. 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.
  23. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(2), pages 249-55.
  24. repec:fth:louvco:9906 is not listed on IDEAS
  25. Emanuele Bacchiega, 2007. "Wage bargaining and vertical differentiation," International Review of Economics, Springer, vol. 54(1), pages 35-52, March.
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