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Union Behavior, Industry Rents, and Optimal Policies

  • Phillip Swagel

This paper examines the supposed welfare gains from strategic trade and industrial policies in the U.S. steel industry. Strategic policies to capture labor rents lead to an endogenous response which greatly diminishes their importance. On the other hand, reducing domestic labor market distortions results in welfare gains nearly as large as those from optimal trade and industrial policies. The paper concludes that the focus on labor rents as the subject of U.S. trade and industrial policy is overstated, at least in manufacturing industries such as integrated steel.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 96/143.

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Length: 31
Date of creation: 01 Dec 1996
Date of revision:
Handle: RePEc:imf:imfwpa:96/143
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  1. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June.
  2. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
  3. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
  4. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  5. Rodrik, Dani, 1987. "Policy Targeting with Endogenous Distortions: Theory of Optimum Subsidy Revisited," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 903-11, November.
  6. Matsuyama, Kiminori, 1990. "Export Subsidies as an Outcome of the Management-Labor Conspiracy," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 803-13, August.
  7. Kala Krishna & Kathleen Hogan & Phillip Swagel, 1989. "The Non-Optimality of Optimal Trade Policy: The U.S. Automobile Indust ry Revisited, 1979-1985," NBER Working Papers 3118, National Bureau of Economic Research, Inc.
  8. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  9. de Melo, Jaime & Tarr, David, 1993. "Industrial Policy in the Presence of Wage Distortions: The Case of the U.S. Auto and Steel Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 833-51, November.
  10. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  11. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May.
  12. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  13. Lawrence F. Katz & Lawrence H. Summers, 1988. "Can Inter-Industry Wage Differentials Justify Strategic Trade Policy?," NBER Working Papers 2739, National Bureau of Economic Research, Inc.
  14. Morrison, Catherine, 1988. "Subequilibrium in the North American Steel Industries: A Study of Short Run Biases from Regulation and Utilisation Fluctuations," Economic Journal, Royal Economic Society, vol. 98(391), pages 390-411, June.
  15. Krishna, Kala & Itoh, Motoshige, 1988. "Content Protection and Oligopolistic Interactions," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 107-25, January.
  16. Robert W. Crandall, 1987. "The Effects of U.S. Trade Protection for Autos and Steel," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 271-288.
  17. Melvyn Fuss & Steven Murphy & Leonard Waverman, 1992. "The State of the North American and Japanese Motor Vehicle Industries: A Partially Calibrated Model to Examine the Impacts of Trade Policy Changes," NBER Working Papers 4225, National Bureau of Economic Research, Inc.
  18. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
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