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Economic Integration, Market Power and Technological Change

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  • Palokangas, Tapio K.

    ()
    (University of Helsinki)

Abstract

We examine a common market which expands by integrating new regions. Capitalists are strategically interdependent through the goods market and they improve their productivity through R&D. Production and R&D employ unionized workers. The purpose of integration is to maximize a weighed average of workers' and capitalists' utilities. The main findings are as follows. Integration benefits capitalists more than workers. If labour unions are strong enough, then the common market can expand indefinitely. Otherwise, there is an upper limit for integration. This is the higher, the higher producer market power or the stronger the capitalists' political influence.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1592.

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Length: 24 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1592

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Keywords: endogenous growth; economic integration; market power;

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  1. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
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  5. Naercio Menezes-Filho & David Ulph & John Van Reenen, 1998. "R&D and unionism: Comparative evidence from British companies and establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(1), pages 45-63, October.
  6. Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
  7. Meckl, Jurgen, 2004. "Accumulation of technological knowledge, wage differentials, and unemployment," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 65-82, March.
  8. Connolly, Robert A & Hirsch, Barry T & Hirschey, Mark, 1986. "Union Rent Seeking, Intangible Capital, and Market Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 567-77, November.
  9. Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April.
  10. Peretto, Pietro F., 1998. "Market Power, Growth and Unemployment," Working Papers 98-16, Duke University, Department of Economics.
  11. Tapio Palokangas, 2005. "International Labor Union Policy and Growth with Creative Destruction," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 90-105, 02.
  12. Palokangas, Tapio, 1996. "Endogenous growth and collective bargaining," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 925-944, May.
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