Labor Market Rigidities and the Political Economy of Trade Protection
Labor market rigidities are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities (such as influential trade unions and high unemployment benefits), that are prevalent in continental European countries, into the well-known Grossman and Helpman (1994) protection for sale model, which has emerged as the leading model in the political economy of trade protection literature. I show that contrary to commonly held views, these labor market rigidities do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets.
|Date of creation:||01 Jan 2004|
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- Xenia Matschke & Shane M. Sherlund, 2006.
"Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation,"
American Economic Review,
American Economic Association, vol. 96(1), pages 405-421, March.
- Matschke, Xenia N. & Sherlund, Shane M, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Center for International Economics, Working Paper Series qt82k4x4f5, Center for International Economics, UC Santa Cruz.
- Matschke, Xenia N. & Sherlund, Shane M, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Department of Economics, Working Paper Series qt0sn637k8, Department of Economics, UC Santa Cruz.
- Xenia Matschke & Shane M. Sherlund, 2004. "Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation," Working papers 2004-36, University of Connecticut, Department of Economics, revised May 2005.
- Matschke, Xenia N. & Sherlund, Shane M, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Department of Economics, Working Paper Series qt82k4x4f5, Department of Economics, UC Santa Cruz.
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- Pinelopi Koujianou Goldberg & Giovanni Maggi, 1997.
"Protection for Sale: An Empirical Investigation,"
NBER Working Papers
5942, National Bureau of Economic Research, Inc.
- Martín Rama & Guido Tabellini, .
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94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, vol. 42(7), pages 1295-1316, July.
- Kiminori Matsuyama, 1990. "Export Subsidies as an Outcome of the Management-Labor Conspiracy," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 803-813.
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