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Price and wage setting in an integrating Europe : firm level evidence

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Author Info
Filip Abraham (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven)
Jozef Konings (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven, LICOS, Centre for Transition Economics; Katholieke Universiteit Leuven)
Stijn Vanormelingen () (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven)

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Abstract

Europe has witnessed the last decade an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states entered the European Union. Economic integration is likely to have an impact on both labor and product markets. Unlike most other papers, that focus on product and labor markets separately, we look at the link between globalization and product and labor market imperfections simultaneously. To this end, we rely on a rich panel of manufacturing firms in Belgium, a small open economy. We find that union bargaining power is higher in sectors characterized by high price cost margins. Moreover, ignoring imperfections on the labor market, leads to an underestimation of product market power. Concerning the influence of globalization, our main findings are that both price cost margins and union bargaining power are typically lower in sectors that are subject higher international competition. This result is especially true for competition from low wage countries

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Paper provided by National Bank of Belgium in its series Research series with number 200610-5.

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Length: 40 pages
Date of creation: Oct 2006
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Handle: RePEc:nbb:reswpp:200610-5

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

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
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  2. 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, November. [Downloadable!] (restricted)
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  3. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2005. "Wages and International Rent Sharing in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 73-84, November. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
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  19. 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. [Downloadable!] (restricted)
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  22. repec:rus:hseeco:122439 is not listed on IDEAS
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(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. Sabien Dobbelaere & Jacques Mairesse, 2009. "Panel Data Estimates of the Production Function and Product and Labor Market Imperfections," Tinbergen Institute Discussion Papers 09-001/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  2. Joachim Keller, 2008. "Agency problems in structured finance – a case study of European CLOs," Documents series 200808-22, National Bank of Belgium. [Downloadable!]
  3. Robert Anderton & Paul Hiebert, . "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP. [Downloadable!]
  4. Hagemejer, Jan & Gradzewicz, Michal, 2007. "Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy," MPRA Paper 15759, University Library of Munich, Germany. [Downloadable!]
  5. Joseph Plasmans & Tomasz Michalak & Jorge Fornero, 2006. "Simulation, estimation and welfare implications of monetary policies in a 3-country NOEM model," Research series 200610-6, National Bank of Belgium. [Downloadable!]
  6. Philippe Moës, 2008. "Multivariate structural time series models with dual cycles : implications for measurement of output gap and potential growth," Research series 200808-20, National Bank of Belgium. [Downloadable!]
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