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Union wage-setting and international trade with footloose capital

Author

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  • Egger, Hartmut
  • Etzel, Daniel

Abstract

This paper sets up a general oligopolistic equilibrium model with two countries that differ in the centralization of union wage-setting. Being interested in the consequences of openness, we show that, in the short run, trade increases welfare and employment in both locations, and it raises income of capital owners as well as workers. In the long run, capital outflows from the country with the more centralized wage-setting generate winners and losers and make the two countries more dissimilar in terms of unemployment or welfare. Decentralization of wage-setting can successfully prevent capital outflow and the export of jobs.

Suggested Citation

  • Egger, Hartmut & Etzel, Daniel, 2014. "Union wage-setting and international trade with footloose capital," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 56-67.
  • Handle: RePEc:eee:regeco:v:48:y:2014:i:c:p:56-67 DOI: 10.1016/j.regsciurbeco.2014.04.008
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    2. Kenji Fujiwara, 2016. "Trade and FDI liberalization in a general oligopolistic equilibrium," Discussion Paper Series 150, School of Economics, Kwansei Gakuin University, revised Nov 2016.
    3. Palokangas, Tapio K., 2017. "Labor Market Regulation, International Trade and Footloose Capital," IZA Discussion Papers 10468, Institute for the Study of Labor (IZA).
    4. Fujiwara, Kenji, 2017. "Trade and FDI liberalization in a general oligopolistic equilibrium," Japan and the World Economy, Elsevier, vol. 41(C), pages 45-49.
    5. Irlacher, Michael & Baumgarten, Daniel & Koch, Michael, 2017. "Short- versus long-run effects of offshoring when sectors are heterogeneous," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168272, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    General oligopolistic equilibrium; Union wage-setting; Asymmetric labor market institutions; Trade liberalization; Footloose capital; Decentralization in union wage-setting;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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