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Wage subsidies and international trade: When does policy coordination pay?

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  • Braun, Sebastian
  • Spielmann, Christian

Abstract

National labour market institutions interact across national boundaries when product markets are global. Labour market policies can thus entail spill-overs, which suggests that there are benefits from international policy coordination. This paper studies the effects of wage subsidies in an international duopoly model with unionised labour markets. The authors document both positive and negative spill-over effects and discuss the benefits and costs from international policy coordination both for the case of symmetric and asymmetric labour market institutions. The results suggest that institutional differences could sign responsible for the slow speed at which labour market policy coordination has progressed so far. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2012-9.

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Date of creation: 2012
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Handle: RePEc:zbw:ifwedp:20129

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Keywords: wage subsidies; policy spill-overs; international policy coordination; unionised labour markets; trade; asymmetric labour market institutions;

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References

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  1. Gabriel Felbermayr & Mario Larch & Lechthaler Wolfgang, 2011. "Endogenous Labor Market Insitutions in an Open Economy," Ifo Working Paper Series Ifo Working Paper No. 108, Ifo Institute for Economic Research at the University of Munich.
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  9. MORICONI, Simone & SATO, Yasuhiro, 2006. "International commodity taxation in the presence of unemployment," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  11. Haufler, Andreas & Schjelderup, Guttorm & Stähler, Frank, 2005. "Barriers to trade and imperfect competition: The choice of commodity tax base," Munich Reprints in Economics, University of Munich, Department of Economics 20414, University of Munich, Department of Economics.
  12. Braun, Sebastian & Spielmann, Christian, 2012. "Wage subsidies and international trade: When does policy coordination pay?," Economics Discussion Papers 2012-9, Kiel Institute for the World Economy.
  13. J.Peter Neary, 2003. "Globalisation and Market Structure," DNB Staff Reports (discontinued), Netherlands Central Bank 100, Netherlands Central Bank.
  14. Brander, James A. & Spencer, Barbara J., 1984. "Trade warfare: Tariffs and cartels," Journal of International Economics, Elsevier, Elsevier, vol. 16(3-4), pages 227-242, May.
  15. Krueger, Alan B. & Mueller, Andreas I., 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," IZA Discussion Papers 3667, Institute for the Study of Labor (IZA).
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Cited by:
  1. Sabastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Birkbeck Working Papers in Economics and Finance, Birkbeck, Department of Economics, Mathematics & Statistics 1007, Birkbeck, Department of Economics, Mathematics & Statistics.

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