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Trade Liberalization and Union Wages in a Differentiated Bertrand Duopoly

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  • Nicole Gürtzgen

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Abstract

In a framework of a unionized international Bertrand duopoly with differentiated products, this article analyzes national labor market interdependencies and the consequences of trade liberalization for union wages. The analysis suggests that national wages are likely to be strategic complements (substitutes) if products are ordinary substitutes (complements). Under the assumption of linear demand, it is shown that bilateral trade liberalization always leads to higher union set wages and union utilities, regardless of the nature of product rivalry. An analysis of the consequences of unilateral tariff reductions shows that foreign tariff reductions always give rise to higher union wages and utilities, whereas the impact of unilateral domestic tariff reductions depends on the nature of product rivalry. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Nicole Gürtzgen, 2002. "Trade Liberalization and Union Wages in a Differentiated Bertrand Duopoly," Open Economies Review, Springer, vol. 13(2), pages 133-151, April.
  • Handle: RePEc:kap:openec:v:13:y:2002:i:2:p:133-151
    DOI: 10.1023/A:1013921230663
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    References listed on IDEAS

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    Cited by:

    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. Maiti, Dibyendu & Mukherjee, Arijit, 2013. "Trade cost reduction, subcontracting and unionised wage," Labour Economics, Elsevier, vol. 21(C), pages 103-110.
    3. Mukherjee, Arijit, 2013. "Endogenous domestic market structure and the effects of a trade cost reduction in a unionised industry," Economic Modelling, Elsevier, vol. 32(C), pages 30-33.
    4. Andersen, Torben M. & Sørensen, Allan, 2007. "Product Market Integration and Labour Markets: Aggregate Gains at the Cost of More Inequality?," IZA Discussion Papers 2556, Institute for the Study of Labor (IZA).
    5. Aretz, Bodo & Busl, Claudia & Gürtzgen, Nicole & Hogrefe, Jan & Kappler, Marcus & Steffes, Susanne & Westerheide, Peter, 2009. "Endbericht zum Forschungsauftrag fe 13/08: "Ursachenanalyse der Verschiebung in der funktionalen Einkommensverteilung in Deutschland" (Aktenzeichen I A 3 - Vw 3170/08/10035)," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110510.

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