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International trade, union wage premia, and welfare in general equilibrium

  • Kreickemeier, Udo
  • Meland, Frode

We study how two distinct forms of globalisation, trade cost reductions and opening up of trade in previously shielded sectors, affect sector-specific wages, employment levels and aggregate welfare in a two-country model of general oligopolistic equilibrium (GOLE) with partly unionised labour markets. We find that both forms of globalisation increase union coverage, and they also lead to a lower union wage premium in shielded sectors. In contrast, the union wage premium in open sectors and aggregate welfare are affected differently by the two types of globalisation. Trade cost reductions in open sectors always lead to higher union wage premia and to lower aggregate welfare, while an increased number of open sectors lowers the union wage premium, and it may also increase welfare.

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Paper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 5.

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Date of creation: 2011
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Handle: RePEc:zbw:tuewef:5
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  1. Neary, Peter, 1988. "Determinants of the Equilibrium Real Exchange Rate," American Economic Review, American Economic Association, vol. 78(1), pages 210-15, March.
  2. Frode Meland, 2006. "A Union-bashing Model of Inflation Targeting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 419-432, October.
  3. Kjell Erik Lommerud & Frode Meland & Lars S¯rgard, 2003. "Unionised Oligopoly, Trade Liberalisation and Location Choice," Economic Journal, Royal Economic Society, vol. 113(490), pages 782-800, October.
  4. Holden,S., 1999. "Wage setting under different monetary regimes," Memorandum 12/1999, Oslo University, Department of Economics.
  5. Paulo Bastos & Odd Rune Straume, . "Globalization, product differentiation and wage inequality," Discussion Papers 10/03, University of Nottingham, GEP.
  6. Bastos, Paulo & Kreickemeier, Udo, 2009. "Unions, competition and international trade in general equilibrium," Journal of International Economics, Elsevier, vol. 79(2), pages 238-247, November.
  7. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Globalization and Union Opposition to Technological Change," CEPR Discussion Papers 4836, C.E.P.R. Discussion Papers.
  8. Paulo Bastos & Udo Kreickemeier & Peter Wright, . "Oligopoly, open shop unions and trade liberalisation," Discussion Papers 07/30, University of Nottingham, GEP.
  9. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2003. "National versus International Mergers in Unionised Oligopoly," CEPR Discussion Papers 4040, C.E.P.R. Discussion Papers.
  10. 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.
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  13. Naylor, Robin, 1999. "Union Wage Strategies and International Trade," Economic Journal, Royal Economic Society, vol. 109(452), pages 102-25, January.
  14. Rasmussen, Bo Sandemann, 1992. " Union Cooperation and Nontraded Goods in General Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(4), pages 561-79.
  15. Vartiainen, Juhana, 2002. " Relative Prices in Monetary Union and Floating," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(2), pages 277-87, June.
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  19. James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
  20. Falvey, Rod & Kreickemeier, Udo, 2005. "Globalisation and factor returns in competitive markets," Journal of International Economics, Elsevier, vol. 66(1), pages 233-248, May.
  21. Huizinga, H.P., 1993. "International market integration and union wage bargaining," Other publications TiSEM 567712dd-8f03-40d8-8428-c, Tilburg University, School of Economics and Management.
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  26. Straume, Odd Rune, 2003. "International mergers and trade liberalisation: implications for unionised labour," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 717-735, May.
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