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The Welfare Effects of Globalization with Labor Market Regulation

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  • Palokangas, Tapio K.

    (University of Helsinki)

Abstract

I examine how globalization affects wages and welfare in a general equilibrium model of international trade with partly oligopolistic markets. Globalization is modeled as reducing trade costs or opening up shielded sectors to trade. There is a national or international common agency that determines minimum wages for the oligopolists, either directly or through supporting labor unions. The lobbies of employers and labor unions influence that agency, relating their prospective political contributions to the latter's decisions. Both a shift from national to international regulation and a decrease in trade costs promote aggregate welfare, but decrease open-sector relative wages.

Suggested Citation

  • Palokangas, Tapio K., 2015. "The Welfare Effects of Globalization with Labor Market Regulation," IZA Discussion Papers 9412, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9412
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    References listed on IDEAS

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    2. Palokangas, Tapio K., 2017. "Labor Market Regulation, International Trade and Footloose Capital," IZA Discussion Papers 10468, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    globalization; international trade; common agency; regulation; labor unions;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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