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Unions, competition and international trade in general equilibrium

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  • Bastos, Paulo
  • Kreickemeier, Udo

Abstract

We develop a two-country, multi-sector model of oligopoly in which unionised and non-unionised sectors interact in general equilibrium. The model is used to study the impact of trade liberalisation, deunionisation and firm entry on wages in unionised and non-unionised sectors, and on welfare. We find that a shift from autarky to free trade increases non-union wages and welfare, whereas the effect on union wages is ambiguous. We also show that partial deunionisation leads to higher wages in both unionised and non-unionised sectors, but only increases welfare when the proportion of unionised sectors is sufficiently low. Finally, wages in non-unionised sectors necessarily increase with firm entry, while the response of union wages and welfare depends on the trade regime.

Suggested Citation

  • Bastos, Paulo & Kreickemeier, Udo, 2009. "Unions, competition and international trade in general equilibrium," Journal of International Economics, Elsevier, vol. 79(2), pages 238-247, November.
  • Handle: RePEc:eee:inecon:v:79:y:2009:i:2:p:238-247
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    More about this item

    Keywords

    Trade unions Product market competition General oligopolistic equilibrium Trade liberalisation;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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