Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effect of Globalization on Union Bargaining and Price-Cost Margins of Firms

Contents:

Author Info

  • Filip Abraham
  • Jozef Konings
  • Stijn Vanormelingen

Abstract

In recent years, Europe has witnessed an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states have joined the European Union. This paper analyzes how this process of increased economic integration has affected labor and product markets. To this end, we use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them. Our findings can be summarized as follows: On average, firms set prices about 30% above marginal costs, but there is substantial variation across sectors, with the lowest mark-up around 19% and the highest around 52%. In addition, we find evidence that unions bargain over both wages and employment. We estimate an index of bargaining power, which reflects the fraction of profits that is passed on to workers into higher wages. Depending on the sector, this fraction varies between 6% and 18% and it increases with the markups of firms. Finally, we find that globalization puts pressure on both markups and union bargaining power, especially when there is increased competition from the low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp181.pdf
Download Restriction: no

Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 18107.

as in new window
Length: 35 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:lic:licosd:18107

Contact details of provider:
Postal: De Bériotstraat 34, B-3000 Leuven
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Email:
Web page: http://www.econ.kuleuven.be/licos
More information through EDIRC

Related research

Keywords: Mark-ups; Trade Unions; International Trade;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, July.
  2. Dobbelaere, Sabien, 2004. "Estimation of price-cost margins and union bargaining power for Belgian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 22(10), pages 1381-1398, December.
  3. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  4. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  5. Bughin, J, 1993. "Union-Firm Efficient Bargaining and Test of Oligopolistic Conduct," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 563-67, August.
  6. James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
  7. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 1999. "The Dynamics of Industrial Markups in Two Small Open Economies: Does National Competition Policy Matter ?," Center for Economic Studies - Discussion papers ces9914, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  8. J. Bradford Jensen & Andrew Bernard & Peter Schott, 2005. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers 05-19, Center for Economic Studies, U.S. Census Bureau.
  9. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August.
  10. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  11. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  12. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521464673.
  13. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  14. Bughin, Jacques, 1996. "Trade Unions and Firms' Product Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 289-307, September.
  15. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
  16. Herv� Boulhol & Sabien Dobbelaere & Sara Maioli, 2009. "Imports as Product and Labour Market Discipline," Tinbergen Institute Discussion Papers 09-002/3, Tinbergen Institute.
  17. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2005. "The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 124-134, February.
  18. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
  19. Francis Kramarz, 2003. "Wages and International Trade," Working Papers 2003-27, Centre de Recherche en Economie et Statistique.
  20. Jan De Loecker & Frederic Warzynski, 2009. "Markups and firm-level export status," NBER Working Papers 15198, National Bureau of Economic Research, Inc.
  21. S. Dobbelaere & J. Mairesse, 2009. "Panel data estimates of the production function and product and labor market imperfections," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/586, Ghent University, Faculty of Economics and Business Administration.
  22. S. Lael Brainard & David A. Riker, 1997. "Are U.S. Multinationals Exporting U.S. Jobs?," NBER Working Papers 5958, National Bureau of Economic Research, Inc.
  23. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  24. Ellen Brock & Sabien Dobbelaere, 2003. "Has International Trade Affected Workers?Bargaining Power?," LICOS Discussion Papers 13603, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  25. Clark, A., 1989. "Efficient Bargains And The Mcdonald-Solow Conjecture," Papers 350, London School of Economics - Centre for Labour Economics.
  26. Stewart, M.B., 1989. "Union Wage Differentials, Product Market Influences And The Division Of Rents," The Warwick Economics Research Paper Series (TWERPS) 323, University of Warwick, Department of Economics.
  27. Ilke Van Beveren, 2006. "Footloose Multinationals in Belgium," LICOS Discussion Papers 16806, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  28. Braconier, Henrik & Ekholm, Karolina, 1999. "Swedish Multinationals and Competition from High- and Low-Wage Locations," CEPR Discussion Papers 2323, C.E.P.R. Discussion Papers.
  29. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
  30. Konings, Jozef & Walsh, Patrick P, 1994. "Evidence of Efficiency Wage Payments in UK Firm Level Panel Data," Economic Journal, Royal Economic Society, vol. 104(424), pages 542-55, May.
  31. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  32. Michel Dumont & Glenn Rayp & Peter Willemé, 2006. "Does internationalization affect union bargaining power? An empirical study for five EU countries," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 77-102, January.
  33. Sourafel Girma & Holger Görg, 2003. "Outsourcing, Foreign Ownership and Productivity: Evidence from UK Establishment Level Data," Discussion Papers of DIW Berlin 361, DIW Berlin, German Institute for Economic Research.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lic:licosd:18107. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.