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

Author

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  • Sabastian Braun

    (Kiel Institute for the World Economy)

  • Christian Spielmann

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Abstract

National labour market institutions interact across national boundaries when product markets are global. Labour market policies can thus entail spill-overs, a fact widely ignored in the academic literature. This paper studies the effects of wage subsidies in an international duopoly model with unionised labour markets. We 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. Our results suggest that institutional differences could sign responsible for the slow speed at which labour market policy coordination has progressed so far.

Suggested Citation

  • Sabastian Braun & Christian Spielmann, 2010. "Wage subsidies and international trade: When does policy coordination pay?," Birkbeck Working Papers in Economics and Finance 1007, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1007
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    File URL: https://eprints.bbk.ac.uk/id/eprint/7548
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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

    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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