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Does product market integration lead to decentralised wage bargaining institutions?

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  • Michele SANTONI

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Abstract

This paper studies the effects of product market integration on wage-bargaining institutions. It first shows evidence of a negative correlation between the level of wage bargaining and proxy measures of integration, such as the degree of openness and import penetration, for a macro-panel of 17 OECD countries over the 1975-2000 period. It then develops a theoretical model of an import-competing unionised Cournot-Nash oligopoly. The model shows that a reduction in trade barriers, by lowering the sharable surplus between home firms and labour when the final goods are substitutes, gives unions incentives to choose more decentralised wage-bargaining institutions. This industry-level mechanism, however, works in the opposite direction with either complements or two-way trade and homogeneous goods. In these cases, cutting trade barriers raises the sharable surplus and encourages domestic wage-setters to choose more centralised institutions.

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Bibliographic Info

Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2009-43.

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Date of creation: 29 Oct 2009
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Handle: RePEc:mil:wpdepa:2009-43

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Related research

Keywords: Endogenous wage bargaining institutions; Unionised oligopolies; Trade integration;

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Cited by:
  1. Domenico Buccella, 2013. "Unions' bargaining coordination in multi-unit firms," Economics Bulletin, AccessEcon, vol. 33(1), pages 217-225.
  2. Domenico Buccella, 2013. "Unions’ bargaining coordination in multinational enterprises," SERIEs, Spanish Economic Association, vol. 4(4), pages 373-392, November.
  3. Pagel, Beatrice & Wey, Christian, 2012. "Unionization structures in international oligopoly," DICE Discussion Papers 44, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Domenico Buccella, 2011. "Labor unions and economic integration: A review," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 25-89, January-D.

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