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A Note on Free Trade Agreement and Wage Bargaining Structure

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  • Yohanes E. Riyanto
  • Jung Hur

Abstract

Mezzeti and Dinopoulos (1991) show that a free trade agreement (trade liberalization) decreases wage rate. However, Naylor (1998) shows that trade liberalization increases wage rate. Both papers consider tariff as exogenously given. In this paper we show that these conflicting results can be nested into a model of international duopoly with a more general wage bargaining structure. Tariff is endogenously determined in our model. In addition, we also derive crucial implications of the wage bargaining structure on the sustainability of trade liberalization

Suggested Citation

  • Yohanes E. Riyanto & Jung Hur, 2004. "A Note on Free Trade Agreement and Wage Bargaining Structure," Econometric Society 2004 Far Eastern Meetings 637, Econometric Society.
    • Handle: RePEc:ecm:feam04:637
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    References listed on IDEAS

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    1. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
    2. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
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    More about this item

    Keywords

    wage bargaining structure; optimal tariff regime; free trade agreement;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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