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The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium

  • Hartmut Egger
  • Daniel Etzel

This paper sets up a general oligopolistic equilibrium model with unionized labor markets. By accounting for productivity di erences, the model features pro t and wage di erentials across industries. We use this setting to study the impact of trade liberalization on employment, welfare, and the distribution of income. In particular, we show that a movement from autarky to free trade with a symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether rms can extract a larger share of rents in the open economy depends on the competitive environment as well as on the degree of centralization in union wage setting. Finally, the distribution of proft income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade.

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File URL: http://www.bgpe.de/texte/DP/088_egger.pdf
File Function: First version, 2009
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Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 088.

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Length: 33 pages
Date of creation: Jan 2010
Handle: RePEc:bav:wpaper:088_egger
Contact details of provider: Web page: http://www.bgpe.de/

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