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Unionization structures in international oligopoly

  • Pagel, Beatrice
  • Wey, Christian

We examine how competition in international markets affects a union's choice of wage regime which can be either uniform or discriminatory. Firms are heterogenous with regard to international competition. When unions choose their wage regimes sequentially, a discriminatory outcome becomes more likely when international competition increases. However, for intermediate levels a union may stick with a uniform wage regime even if the rival union adopts a discriminatory regime. When competition is sufficiently intense, both unions revert to the discriminatory regime. Paradoxically only in those latter instances all parties (consumers, workers and firms) may be better off (each in aggregate) if all unions adopt a uniform wage regime. We conclude that union incentives to coordinate their wage regimes should then also become largest.

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Paper provided by Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf in its series DICE Discussion Papers with number 44.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:44
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  1. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
  2. Dobson, Paul W. & Waterson, Michael, 2008. "Chain-Store Competition: Customized vs. Uniform Pricing," The Warwick Economics Research Paper Series (TWERPS) 840, University of Warwick, Department of Economics.
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  8. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
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  10. Leahy, Dermot & Montagna, Catia, 2000. "Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?," Economic Journal, Royal Economic Society, vol. 110(462), pages C80-92, March.
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  12. 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.
  13. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2007. "A Cartel Analysis of the German Labor Institutions and Its Implications for Labor Market Reforms," Ruhr Economic Papers 9, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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