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

  • Sabastian Braun

    (Kiel Institute for the World Economy)

  • Christian Spielmann

    (Department of Economics, Mathematics & Statistics, Birkbeck)

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.

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File URL: http://www.bbk.ac.uk/ems/research/wp/2010/PDFs/BWPEF1007.pdf
File Function: First version, 2010
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Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 1007.

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Date of creation: Mar 2010
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Handle: RePEc:bbk:bbkefp:1007
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