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Unions, competition and international trade in general equilibrium

  • Bastos, Paulo
  • Kreickemeier, Udo

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.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 79 (2009)
Issue (Month): 2 (November)
Pages: 238-247

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Handle: RePEc:eee:inecon:v:79:y:2009:i:2:p:238-247
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Lommerud, Kjell Erik & Meland, Frode & Rune Straume, Odd, 2006. "Globalisation and union opposition to technological change," Journal of International Economics, Elsevier, vol. 68(1), pages 1-23, January.
  2. 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.
  3. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
  4. J Peter Neary, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Working Papers 200404, School Of Economics, University College Dublin.
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  7. Jan Rose SØRENSEN, 1993. "Integration of Product Markets when Labour Markets are Unionized," Discussion Papers (REL - Recherches Economiques de Louvain) 1993044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, May.
  9. Naylor, Robin, 1997. "Union Wage Strategies and International Trade," The Warwick Economics Research Paper Series (TWERPS) 480, University of Warwick, Department of Economics.
  10. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-59, May-June.
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  12. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, 03.
  13. Neary, J Peter, 1978. "Dynamic Stability and the Theory of Factor-Market Distortions," American Economic Review, American Economic Association, vol. 68(4), pages 671-82, September.
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  16. Mezzetti, C. & Dinopoulos, E., 1989. "Domestic Unionization And Import Competition," Papers 337, California Davis - Institute of Governmental Affairs.
  17. Straume, Odd Rune, 2003. "International mergers and trade liberalisation: implications for unionised labour," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 717-735, May.
  18. Munch, Jakob Roland & Skaksen, Jan Rose, 2002. " Product Market Integration and Wages in Unionized Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(2), pages 289-99, June.
  19. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, June.
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