Globalization and the effects of national versus international competition on the labour market. Theory and evidence from Belgian firm level data
AbstractIn this paper we first develop a simple theoretical framework which shows that important differences exist between national and international competition and their effect on national labour markets. National competition refers to a reduction of monopoly power in the product market through improved market contestability and market access, which is the responsibility of competition authorities. International competition refers to a reduction in product market competition as a result of trade liberalization. We show that when the domestic market is unionized, national entry (FDI or domestic entry) has very different effects on the national labour market than international entry (imports in the relevant product market). One result we obtain is that national competition need not increase domestic employment while trade competition need not lower domestic employment. Our analysis has at least two important implications. First, geographic location of competitors matters when institutional settings like trade unions are country specific. Second, a change in competition policy is likely to affect labour markets differently than a change in trade policy. The results also indicate that apart from location, market structure and the level at which wages are bargained over (firm or sector level) matter. In a further step the theoretical predictions we derive, are tested on Belgian company accounts data supplemented with data from a postal survey.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces9821.
Date of creation: Mar 1998
Date of revision:
Other versions of this item:
- Hylke Vandenbussche & Jozef Konings, 1998. "Globalisation and the Effects of National Versus International Competition on the Labour Market: Theory and Evidence from Belgian Firm Level Data," The World Economy, Wiley Blackwell, vol. 21(8), pages 1151-1177, November.
- Vandenbussche, Hylke & Konings, Joep, 1998. "Globalization and the effects of national versus international competition on the labour market. Theory and evidence from Belgian firm level data," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/237911, Katholieke Universiteit Leuven.
- NEP-ALL-2008-04-21 (All new papers)
- NEP-COM-2008-04-21 (Industrial Competition)
- NEP-MIC-2008-04-21 (Microeconomics)
- NEP-OPM-2008-04-21 (Open Economy Macroeconomic)
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