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

  • Braun, Sebastian
  • Spielmann, Christian

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.

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File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2012-30
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File URL: http://econstor.eu/bitstream/10419/60982/1/720812801.pdf
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Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 6 (2012)
Issue (Month): ()
Pages: 1-42

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Handle: RePEc:zbw:ifweej:201230
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  1. Hervé Boulhol, 2008. "Unemployment and interactions between trade and labour market institutions," Documents de travail du Centre d'Economie de la Sorbonne bla08016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. Sebastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Kiel Working Papers 1599, Kiel Institute for the World Economy.
  3. Gabriel Felbermayr & Mario Larch & Wolfgang Lechthaler, 2009. "Unemployment in an Interdependent World," Kiel Working Papers 1540, Kiel Institute for the World Economy.
  4. Fredriksson, Peter & Holmlund, Bertil, 2005. "Optimal unemployment insurance design: time limits, monitoring, or workfare?," Working Paper Series 2005:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  5. Helpman, Elhanan & Itskhoki, Oleg, 2009. "Labor Market Rigidities, Trade, and Unemployment," CEPR Discussion Papers 7502, C.E.P.R. Discussion Papers.
  6. Olaf van Vliet & Ferry Koster, 2011. "Europeanization and the Political Economy of Active Labour Market Policies," European Union Politics, , vol. 12(2), pages 217-239, June.
  7. Haufler, Andreas & Pflüger, Michael, 2007. "International oligopoly and the taxation of commerce with revenue-constrained governments," Munich Reprints in Economics 20424, University of Munich, Department of Economics.
  8. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  9. Felbermayr, Gabriel J. & Larch, Mario & Lechthaler, Wolfgang, 2012. "Endogenous labor market institutions in an open economy," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 30-45.
  10. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  11. Krueger, Alan B. & Mueller, Andreas, 2010. "Job search and unemployment insurance: New evidence from time use data," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 298-307, April.
  12. 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.
  13. James A. Brander & Barbara J. Spencer, 1983. "Trade Warfare: Tariffs and Cartels," NBER Working Papers 1193, National Bureau of Economic Research, Inc.
  14. J Peter Neary, 2002. "Globalisation and Market Structure," Working Papers 200220, School Of Economics, University College Dublin.
  15. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323, March.
  16. Haufler, Andreas & Schjelderup, Guttorm & Stähler, Frank, 2005. "Barriers to trade and imperfect competition: The choice of commodity tax base," Munich Reprints in Economics 20414, University of Munich, Department of Economics.
  17. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  18. Martin Heidenreich & Gabriele Bischoff, 2008. "The Open Method of Co-ordination: A Way to the Europeanization of Social and Employment Policies?," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 497-532, 06.
  19. MORICONI, Simone & SATO, Yasuhiro, 2006. "International commodity taxation in the presence of unemployment," CORE Discussion Papers 2006069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  20. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
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