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

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  • Hartmut Egger
  • Daniel Etzel

Abstract

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.

Suggested Citation

  • Hartmut Egger & Daniel Etzel, 2010. "The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium," Working Papers 088, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:088_egger
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    Cited by:

    1. Wrona, Jens & Kreickemeier, Udo, 2016. "Industrialisation and the Big Push in a Global Economy," Annual Conference 2016 (Augsburg): Demographic Change 145707, Verein für Socialpolitik / German Economic Association.
    2. Kamei, Keita, 2014. "International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly," MPRA Paper 59388, University Library of Munich, Germany.
    3. Baumgarten, Daniel & Irlacher, Michael & Koch, Michael, 2018. "Offshoring and non-monotonic employment effects across industries in general equilibrium," Ruhr Economic Papers 746, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Ioana Veronica ALEXA & Simona Valeria TOMA & Daniela Ancuţa SARPE, 2013. "Strategic Investment and Trade in an Oligopolistic Setting," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 5-10.
    5. repec:eee:reecon:v:71:y:2017:i:3:p:564-587 is not listed on IDEAS
    6. Priya Ranjan, 2014. "Globalization, Jobs, and Welfare: The Roles of Social Protection and Redistribution," Working Papers 141507, University of California-Irvine, Department of Economics.
    7. Ranjan, Priya, 2016. "Globalization and risk averse workers: The roles of labor market and trade policies," Journal of International Economics, Elsevier, vol. 103(C), pages 64-79.
    8. Borrs, Linda & Knauth, Florian, 2016. "The impact of trade and technology on wage components," DICE Discussion Papers 241, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Gabriel Felbermayr & Andreas Hauptmann & Hans-Jörg Schmerer, 2014. "International Trade and Collective Bargaining Outcomes: Evidence from German Employer–Employee Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(3), pages 820-837, July.
    10. repec:kap:iecepo:v:14:y:2017:i:2:d:10.1007_s10368-016-0371-1 is not listed on IDEAS
    11. Palokangas, Tapio K., 2017. "Labor Market Regulation, International Trade and Footloose Capital," IZA Discussion Papers 10468, Institute for the Study of Labor (IZA).
    12. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
    13. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.
    14. Rudy Colacicco, 2016. "-Environment, Imperfect Competition, and Trade: Insights for Optimal Policy in General Equilibrium," Economics, Finance and Accounting Department Working Paper Series n273-16.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    15. Hosaki Sano, 2018. "The endogenous decisions of unionization and international trade: A general oligopolistic equilibrium model analysis," Discussion Papers in Economics and Business 18-14, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    16. Brändle, Tobias & Kalweit, René, 2016. "The Employment Effects of the EU Eastern Enlargement in Germany," Annual Conference 2016 (Augsburg): Demographic Change 145502, Verein für Socialpolitik / German Economic Association.
    17. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    18. Hartmut Egger & Daniel Etzel, 2012. "Union Wage Setting and International Trade," CESifo Working Paper Series 3929, CESifo Group Munich.
    19. Catia Montagna & Antonella Nocco, 2015. "(De)Unionization, Trade Liberalization and Selection," Metroeconomica, Wiley Blackwell, vol. 66(1), pages 91-122, February.
    20. Irlacher, Michael & Baumgarten, Daniel & Koch, Michael, 2017. "Short- versus long-run effects of offshoring when sectors are heterogeneous," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168272, Verein für Socialpolitik / German Economic Association.
    21. repec:bla:reviec:v:25:y:2017:i:1:p:76-97 is not listed on IDEAS
    22. Mariam Camarero & Gaetano D’Adamo & Cecilio Tamarit, 2014. "The role of Institutions in explaining wage determination in the Euro Area: a panel cointegration approach," Working Papers 2014/15, Economics Department, Universitat Jaume I, Castellón (Spain).
    23. Egger, Hartmut & Etzel, Daniel, 2014. "Union wage-setting and international trade with footloose capital," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 56-67.

    More about this item

    Keywords

    General oligopolistic equilibrium; Unionized labor market; Trade liberalization; Income distribution;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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