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Wage subsidies and international trade: When does policy coordination pay?

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  • Braun, Sebastian
  • Spielmann, Christian

Abstract

National labour market institutions interact across national boundaries when product markets are global. Labour market policies can thus entail spill-overs, which suggest that there are benefits from international policy coordination. This paper studies the effects of wage subsidies in an international duopoly model with unionized labour markets. The authors document both positive and negative spill-over effects and discuss the benefits and costs from international policy coordination both for the case of symmetric and asymmetric labour market institutions. The results suggest that institutional differences could sign responsible for the slow speed at which labour market policy coordination has progressed so far.

Suggested Citation

  • Braun, Sebastian & Spielmann, Christian, 2012. "Wage subsidies and international trade: When does policy coordination pay?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-42.
    • Handle: RePEc:zbw:ifweej:201230
    DOI: 10.5018/economics-ejournal.ja.2012-30
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    1. Braun, Sebastian & Spielmann, Christian, 2012. "Wage subsidies and international trade: When does policy coordination pay?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-42.

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    More about this item

    Keywords

    wage subsidies; policy spill-overs; international policy coordination; unionized labour markets; trade; asymmetric labour market institutions;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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