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Unions, Competition and International Trade in General Equilibrium

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  • Paulo Bastos
  • Udo Kreickemeier

Abstract

We develop a two-country, multi-sector model of oligopoly in which unionised and non-unionised sectors interact in general equilibrium. The model is used to study the impact of trade liberalisation, deunionisation and firm entry on wages in unionised and non-unionised sectors, and on welfare. We find that a shift from autarky to free trade increases non-union wages and welfare, whereas the effect on union wages is ambiguous. We also show that partial deunionisation leads to higher wages in both unionised and non-unionised sectors, but only increases welfare when the proportion of unionised sectors is sufficiently low. Finally, wages in non-unionised sectors necessarily increase with firm entry, while the response of union wages and welfare depends on the trade regime.

Suggested Citation

  • Paulo Bastos & Udo Kreickemeier, 2008. "Unions, Competition and International Trade in General Equilibrium," Discussion Papers 08/28, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:08/28
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Trade Unions; Product Market Competition; General Oligopolistic Equilibrium; Trade Liberalisation;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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