Unions and Market Integration in Contests
In this paper, we study the effects of introducing endogenous costs in a Tullock model of rent-seeking. We show that unions can be efficiency improving, and that the firms' levels of effort depend more critically upon the number of firms participating in the contest when unions are present. We then study the effects of market integration in a two-country setup. Integrating two initially separate markets is shown to decrease union set wages, but is nevertheless beneficial to firms of both countries only if there are sufficiently few contestants. However, unions and firms in one country might benefit from integration if their resident country is sufficiently large compared to the post-integration market. Copyright 2002 by Kluwer Academic Publishers
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