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Union Wage Strategies and International Trade

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Author Info
Naylor, Robin

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Abstract

In this paper, we analyze the relationship between wage outcomes and the nature of international trade and economic integration when labour markets are unionized and a homogeneous product market is characterized by intra-industry trade. We characterize the full set of possible trade regimes for different combinations of wages and derive unions' wage reaction functions. We show that a unions' choice between a high and a low-wage strategy will depend on the value of the trade costs. We find that: (i) compared to a non-union setting, unions reduce the prohibitive trade cost and that (ii) this rules out trade in that region of trade costs over which, in the non-union model. welfare falls as trade costs fall, (iii) in any trade equilibrium, falling trade costs lead monopoly unions to set higher wages, (iv) there is a range of trade costs for which equilibrium is non-existent and (v) the characterization of the union wage-setting as a Prisioners' Dilemma and hence the incentives for international union coordination of wage demands, depend upon the extent of trade costs.

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Publisher Info
Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 480.

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Length: 36 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:wrk:warwec:480

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Related research
Keywords: international trade ; tariffs ; economic integration ; wage determination ; union bargaining;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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  1. Amy J. Glass & Kamal Saggi, 2005. "Exporting versus Direct Investment under Local Sourcing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(4), pages 627-647, December. [Downloadable!] (restricted)
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  2. Alain Borghijs & Sjef Ederveen & Ruud de Mooij, 2003. "European Wage Coordination: Nightmare or dream to come true?," Economics Working Papers 020, European Network of Economic Policy Research Institutes. [Downloadable!]
  3. Alain Borghijs & Sjef Ederveen & Ruud de Mooij, . "European wage coordination: Nightmare or dream to come true? An economic analysis of wage bargaining institutions in the EU," CPB Discussion Papers 17, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  4. Robin Naylor, 1999. "Endogenous determination of trade regime and bargaining outcome," Working Paper CRENoS 199910, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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  5. Kjell Erik Lommerud & Frode Meland & Odd Rune Straume, 2005. "Can Deunionization Lead to International Outsourcing?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics. [Downloadable!]
  7. Lommerud, Kjell Erik & Meland, Frode & Sørgard, Lars, 2001. "Unionized Oligopoly, Trade Liberalization and Location Choice," CEPR Discussion Papers 2990, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. David Collie & Hylke Vandenbussche, 2005. "Can Import Tariffs Deter Outward FDI?," Open Economies Review, Springer, vol. 16(4), pages 341-362, October. [Downloadable!] (restricted)
  9. Aditya Bhattacharya, 2008. "Import Quotas, Export Promotion and Intra-industry Trade," Working Papers id:1626, esocialsciences.com. [Downloadable!]
  10. Domenico Buccella, . "International Production and Welfare Distribution Under Different Union Wage Settings," FIW Working Paper series 025, FIW. [Downloadable!]
  11. M. Correa-López, 2006. "A model of unionized oligopoly in general equilibrium," The School of Economics Discussion Paper Series 0605, Economics, The University of Manchester. [Downloadable!]
  12. Torben Andersen & Jan Skaksen, 2007. "Labour Demand, Wage Mark-ups and Product Market Integration," Journal of Economics, Springer, vol. 92(2), pages 103-135, October. [Downloadable!] (restricted)
  13. BACCHIEGA, Emanuele, 2004. "Vertical differentiation, wage bargaining and intra-industry trade liberalization," CORE Discussion Papers 2004028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  14. Jakob Munch & Jan Sørensen, 2000. "Competitiveness and Integration of Product Markets," Open Economies Review, Springer, vol. 11(4), pages 359-381, October. [Downloadable!] (restricted)
  15. Collie, David R & Vandenbussche, Hylke, 2001. "Trade, FDI and Unions," CEPR Discussion Papers 2772, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  16. Odd Rune Straume, 2006. "Product Market Integration and Environmental Policy Coordination in An International Duopoly," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(4), pages 535-563, August. [Downloadable!] (restricted)
  17. Sapir, André, 2000. "Who is Afraid of Globalization? The Challenge of Domestic Adjustment in Europe and America," CEPR Discussion Papers 2595, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  18. López, Mónica Correa & Nayor, Robin A., 2002. "The Cournot-Bertrand Profit Differential : A Reversal Result In A Differentiated Duopoly With Wage Bargaining," The Warwick Economics Research Paper Series (TWERPS) 631, University of Warwick, Department of Economics. [Downloadable!]
  19. Damiaan Persyn, 2006. "Trade and Race-to-the-bottom Wage Competition," LICOS Discussion Papers 17306, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  20. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Globalization and Union Opposition to Technological Change," CEPR Discussion Papers 4836, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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