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Product Market Integration and Wages: Evidence from a Cross-Section of Manufacturing Establishments in the United Kingdom

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  • Driffill, John
  • Meschi, Meloria
  • Ulph, Alistair Mitchell

Abstract

Theory predicts that when economies become more integrated through the removal of tariff and other barriers to trade, resulting in an increase in competition in product markets, there should be effects on wage and employment outcomes in labour markets, particularly those in which unions are active. We investigate this idea empirically using a cross-section of UK manufacturing establishments from the 1990 WIRS data set. A reduction in non-tariff barriers from high to medium leads to lower wages, particularly for unskilled workers. Further reductions in non-tariff barriers produce a less well-determined effect. Intra-industry trade flows relative to sales, which are also used as a proxy for international integration, do not appear to affect wages so markedly.

Suggested Citation

  • Driffill, John & Meschi, Meloria & Ulph, Alistair Mitchell, 1998. "Product Market Integration and Wages: Evidence from a Cross-Section of Manufacturing Establishments in the United Kingdom," CEPR Discussion Papers 1818, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1818
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    References listed on IDEAS

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    Cited by:

    1. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    2. Böckerman, Petri & Riihimäki, Elisa, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," MPRA Paper 16903, University Library of Munich, Germany.

    More about this item

    Keywords

    Integration; Labour Markets; Unions; Wages;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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