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Union wage demands with footloose firms

Author

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  • Damiaan Persyn

Abstract

This paper analyses the wage demands of a sector-level monopoly union facing internationally mobile firms. A simple two-country economic geography model is used to describe how firms relocate in function of international di erences in production costs and market size. The union sets wages in function of the firm level labour demand elasticity and the responsiveness of firms to relocate internationally. If countries are suffciently symmetric lower foreign wages and lower trade costs necessarily lead to lower union wage demands. With asymmetric countries these intuitive properties do not always hold. But even for symmetric countries it holds that small increases in market size or trade costs makes union wages more sensitive to the foreign wage level.

Suggested Citation

  • Damiaan Persyn, 2009. "Union wage demands with footloose firms," LICOS Discussion Papers 22809, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    • Handle: RePEc:lic:licosd:22809
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    References listed on IDEAS

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    Cited by:

    1. Persyn, Damiaan, 2008. "Trade as a Wage Disciplining Device," IZA Discussion Papers 3786, IZA Network @ LISER.

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    Keywords

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    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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