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Economic Integration, Imperfect Competition, and International Policy Coordination

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Author Info
Holmlund, Bertil () (Department of Economics)
Kolm, Ann-Sofie () (Department of Economics)

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Abstract

The paper examines policy externalities between imperfectly competitive open economies where unemployment prevails in general equilibrium. We develop a two-country and two-sector model with monopolistic competition in the goods market and wage bargaining in the labor market. Policy externalities operate through the real exchange rate and economic integration is modeled as a reduction in trade costs. We explore how market integration influences policy spillovers, employment and real wages. We also examine how national and supranational commodity tax policies affect sectoral and total employment. Finally, we characterize optimal commodity taxes with non-cooperative and cooperative policies and offer some rough estimates of the welfare gains from policy coordination, using a calibrated version of the model.

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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1999:7.

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Length: 27 pages
Date of creation: 22 Apr 1999
Date of revision:
Publication status: Published in Oxford Economic Papers, 2002, pages 207-229.
Handle: RePEc:hhs:uunewp:1999_007

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research
Keywords: Economic integration; imperfect competition; wage determination; policy cooperation;

Other versions of this item:

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
F15 - International Economics - - Trade - - - Economic Integration
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Holmlund, Bertil, 1997. "Macroeconomic Implications of Cash Limits in the Public Sector," Economica, London School of Economics and Political Science, vol. 64(253), pages 49-62, February. [Downloadable!] (restricted)
  2. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
    Other versions:
  3. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(2), pages 249-55.
  4. Bertil Holmlund & Ann-Sofie Kolm, 2000. "Environmental Tax Reform in a Small Open Economy With Structural Unemployment," International Tax and Public Finance, Springer, vol. 7(3), pages 315-333, May. [Downloadable!] (restricted)
    Other versions:
  5. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January. [Downloadable!] (restricted)
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  6. Jan Sørensen, 1994. "Market integration and imperfect competition in labor and product markets," Open Economies Review, Springer, vol. 5(1), pages 115-130, March. [Downloadable!] (restricted)
  7. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September. [Downloadable!] (restricted)
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  8. Devereux, Michael B, 1991. "The Terms of Trade and the International Coordination of Fiscal Policy," Economic Inquiry, Oxford University Press, vol. 29(4), pages 720-36, October.
  9. Lockwood, Ben, 2001. "Tax competition and tax co-ordination under destination and origin principles: a synthesis," Journal of Public Economics, Elsevier, vol. 81(2), pages 279-319, August. [Downloadable!] (restricted)
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  10. Andersen, Torben M. & Rasmussen, Bo Sandemann & Sorensen, Jan Rose, 1996. "Optimal fiscal policy in open economies with labour market distortions," Journal of Public Economics, Elsevier, vol. 63(1), pages 103-117, December. [Downloadable!] (restricted)
  11. Stephen J. Turnovsky, 1989. "The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model," NBER Working Papers 2466, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
  13. Danthine, Jean-Pierre & Hunt, Jennifer, 1994. "Wage Bargaining Structure, Employment and Economic Integration," Economic Journal, Royal Economic Society, vol. 104(424), pages 528-41, May. [Downloadable!] (restricted)
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  14. Holmlund, B. & Kolm, A.-S., 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Papers 1999:7, Uppsala - Working Paper Series.
    Other versions:
  15. Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November. [Downloadable!] (restricted)
  16. Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-85, March. [Downloadable!] (restricted)
  17. Andersen, Torben M. & Sorensen, Jan Rose, 1995. "Unemployment and fiscal policy in an economic and monetary union," European Journal of Political Economy, Elsevier, vol. 11(1), pages 27-43, March. [Downloadable!] (restricted)
  18. Driffill, John & van der Ploeg, Frederick, 1995. " Trade Liberalization with Imperfect Competition in Goods and Labour Markets," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(2), pages 223-43, June.
  19. Keen, Michael & Lahiri, Sajal, 1998. "The comparison between destination and origin principles under imperfect competition," Journal of International Economics, Elsevier, vol. 45(2), pages 323-350, August. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Torben M. Andersen, . "International Integration and the Welfare State," Economics Working Papers 2002-2, School of Economics and Management, University of Aarhus. [Downloadable!]
  2. Andersen, Torben M & Spange, Morten, 2002. "International Interdependencies in Fiscal Stabilization Policies," CEPR Discussion Papers 3580, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Holmlund, Bertil & Kolm, Ann-Sofie, 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Working Paper Series 1999:7, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  4. André Fourçans & Thierry Warin, 2001. "Tax Harmonization versus Tax Competition in Europe: A Game Theoretical Approach," Cahiers de recherche CREFE / CREFE Working Papers 132, CREFE, Université du Québec à Montréal. [Downloadable!]
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