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Vertical differentiation, wage bargaining and intra-industry trade liberalization

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Author Info
BACCHIEGA, Emanuele

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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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Publisher 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: 01 May 2004
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Handle: RePEc:cor:louvco:2004028

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Related research
Keywords: vertical differentiation; workersÕ skills; wage bargaining; trade liberalization; industry asymmetries;

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
J00 - Labor and Demographic Economics - - General - - - General
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

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  1. 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. [Downloadable!] (restricted)
  2. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(2), pages 249-55.
  3. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 199-230, 04. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. GABSZEWICZ, Jean & TURRINI, Alessandro, 1999. "WorkersÕskills and product selection," CORE Discussion Papers 1999006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. 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. [Downloadable!] (restricted)
  8. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics. [Downloadable!]
  9. BACCHIEGA, Emanuele, 2002. "Wage bargaining and vertical differentiation," CORE Discussion Papers 2002076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  10. Greenaway, David & Torstensson, Johan, 1997. "Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD," Working Paper Series 144, Trade Union Institute for Economic Research. [Downloadable!]
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  11. 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. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
  13. De Fraja, Giovanni, 1996. "Product line competition in vertically differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 389-414, May. [Downloadable!] (restricted)
  14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  15. 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.
  16. Motta, Massimo, 1992. "Sunk Costs and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(412), pages 578-87, May. [Downloadable!] (restricted)
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  17. Naylor, Robin, 1999. "Union Wage Strategies and International Trade," Economic Journal, Royal Economic Society, vol. 109(452), pages 102-25, January. [Downloadable!] (restricted)
    Other versions:
  18. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March. [Downloadable!] (restricted)
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