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Differences in the degree of unionization as a source of comparative advantage in open economies

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  • Hartmut Egger
  • Frode Meland
  • Hans-Jörg Schmerer

Abstract

This paper considers two integrated countries that differ only in their labour markets: one country hosts unions, whereas the other one pays competitive wages. These institutional differences are a source of comparative advantage, which crucially impact inter-industry trade and welfare in the open economy. In this setting, deunionization exerts opposing welfare effects in the two economies. Increasing product market competition is beneficial for the unionized country and detrimental for its trading partner. Finally, we conduct an empirical analysis that provides strong support for the main hypotheses of our theoretical model.

Suggested Citation

  • Hartmut Egger & Frode Meland & Hans-Jörg Schmerer, 2015. "Differences in the degree of unionization as a source of comparative advantage in open economies," Canadian Journal of Economics, Canadian Economics Association, vol. 48(1), pages 245-272, February.
    • Handle: RePEc:cje:issued:v:48:y:2015:i:1:p:245-272
    DOI: 10.1111/caje.12124
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    Cited by:

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    2. Hosaki Sano, 2018. "Labor union and firm fs relocation: A general oligopolistic equilibrium model analysis," Discussion Papers in Economics and Business 18-15-Rev., Osaka University, Graduate School of Economics, revised May 2018.
    3. Cruz, Manuel David, 2023. "Labor Productivity, Real Wages, and Employment in OECD Economies," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 367-382.
    4. Wrona, Jens & Kreickemeier, Udo, 2016. "Industrialisation and the Big Push in a Global Economy," VfS Annual Conference 2016 (Augsburg): Demographic Change 145707, Verein für Socialpolitik / German Economic Association.
    5. Baumgarten, Daniel & Lehwald, Sybille, 2019. "Trade Exposure and the Decline in Collective Bargaining: Evidence From Germany," Rationality and Competition Discussion Paper Series 165, CRC TRR 190 Rationality and Competition.
    6. Hartmut Egger & Simone Habermeyer, 2020. "How Preferences Shape the Welfare and Employment Effects of Trade," Working Papers 188, Bavarian Graduate Program in Economics (BGPE).
    7. Jayjit Roy, 2016. "Employment Protection Legislation and International Trade," Working Papers 16-06, Department of Economics, Appalachian State University.
    8. Roy, Jayjit, 2021. "The effect of employment protection legislation on international trade," Economic Modelling, Elsevier, vol. 94(C), pages 221-234.
    9. Hartmut Egger & Simone Habermeyer, 2022. "How preferences shape the welfare and employment effects of trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(3), pages 815-853, August.
    10. Jeff Chan, 2019. "Labour market characteristics and surviving import shocks," The World Economy, Wiley Blackwell, vol. 42(5), pages 1288-1315, May.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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