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International Trade, Union Wage Premia,and Welfare in General Equilibrium

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  • Kreickemeier, Udo

    ()
    (Department of Economics , University of Tübingen)

  • Meland, Frode

    ()
    (University of Bergen, Norway)

Abstract

We study how two distinct forms of globalisation, trade cost reductions and opening up of trade in previously shielded sectors, affect sector-specific wages, employment levels and aggregate welfare in a two-country model of general oligopolistic equilibrium (GOLE) with partly unionised labour markets. We find that both forms of globalisation increase union coverage, and they also lead to a lower union wage premium in shielded sectors. In contrast, wage premium in open sectors and aggregate welfare are affected differently by the two types of globalisation. Trade cost reductions in open sectors always lead to higher union wage premia and to lower aggregate welfare, while an increased number of open sectors lowers the union wage premium, and it may also increase welfare.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 04/11.

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Length: 26 pages
Date of creation: 25 Mar 2011
Date of revision:
Handle: RePEc:hhs:bergec:2011_004

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Keywords: Globalisation; Unions; Non-traded Goods; General Oligopolistic Equilibrium ;

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