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Union behavior, industry rents, and optimal policies

  • Swagel, Phillip

This paper examines the supposed welfare gains from strategic trade and industrial policies in the U.S. steel industry. Strategic policies to capture labor rents lead to an endogenous response which greatly diminishes their importance. On the other hand, reducing domestic labor market distortions results in welfare gains nearly as large as those from optimal trade and industrial policies. The paper concludes that the focus on labor rents as the subject of U.S. trade and industrial policy is overstated, at least in manufacturing industries such as integrated steel.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 18 (2000)
Issue (Month): 6 (August)
Pages: 925-947

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Handle: RePEc:eee:indorg:v:18:y:2000:i:6:p:925-947
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  1. Melvyn Fuss & Steven Murphy & Leonard Waverman, 1992. "The State of the North American and Japanese Motor Vehicle Industries: A Partially Calibrated Model to Examine the Impacts of Trade Policy Changes," NBER Working Papers 4225, National Bureau of Economic Research, Inc.
  2. Melo, J. de & Tarr, D., 1993. "Industrial Policy in the Presence of Wage Distorsions: The Case of the US Auto and Steel Industries," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 93.17, Institut d'Economie et Econométrie, Université de Genève.
  3. Rodrik, Dani, 1987. "Policy Targeting with Endogenous Distortions: Theory of Optimum Subsidy Revisited," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 903-11, November.
  4. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  5. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  6. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June.
  7. Lawrence F. Katz & Lawrence H. Summers, 1989. "Can Interindustry Wage Differentials Justify Strategic Trade Policy?," NBER Chapters, in: Trade Policies for International Competitiveness, pages 85-124 National Bureau of Economic Research, Inc.
  8. Kala Krishna & Kathleen Hogan & Phillip Swagel, 1989. "The Non-Optimality of Optimal Trade Policy: The U.S. Automobile Indust ry Revisited, 1979-1985," NBER Working Papers 3118, National Bureau of Economic Research, Inc.
  9. Kala Krishna & Motoshige Itoh, 1986. "Content Protection and Oligopolistic Interactions," NBER Working Papers 1843, National Bureau of Economic Research, Inc.
  10. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
  11. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  12. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
  13. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
  14. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  15. Morrison, Catherine, 1988. "Subequilibrium in the North American Steel Industries: A Study of Short Run Biases from Regulation and Utilisation Fluctuations," Economic Journal, Royal Economic Society, vol. 98(391), pages 390-411, June.
  16. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May.
  17. Robert W. Crandall, 1987. "The Effects of U.S. Trade Protection for Autos and Steel," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 271-288.
  18. Matsuyama, Kiminori, 1990. "Export Subsidies as an Outcome of the Management-Labor Conspiracy," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 803-13, August.
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