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Unionized Oligopoly, Trade Liberalization and Location Choice

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  • Lommerud, Kjell Erik
  • Meland, Frode
  • Sørgard, Lars

Abstract

In a two-country reciprocal-dumping model, with one country unionized, we analyse how wage setting and firm location are influenced by trade liberalization. We show that trade liberalization can induce a unionized firm to move all production abroad. This cannot prevail in a corresponding, non-unionized model. Trade liberalization has a non-monotonic effect on wages. For a given location choice, trade liberalization increases national welfare in the unionized country. When a shift of some or all production to the foreign country occurs, national welfare can be reduced.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2990.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:2990

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Keywords: foreign direct investments; trade liberalization; unionized oligopoly;

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References

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