Wage differentials: Trade Openness and Wage Bargaining

Gustavo Gonzaga, Beatriz Muriel Hernández and Cristina Terra

No 03/2014, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: We build a theoretical model that incorporates unionization in the labor market into a Heckscher-Ohlin-Samuelson (HOS) framework to investigate the impact of unionization on the Stolper-Samuelson Theorem. To capture the American economy case, we assume that unskilled labor in the manufactured goods sector is unionized, and that sector is intensive in skilled labor, and that trade liberalization increases the relative price of manufactured goods. In the HOS model, trade liberalization induces a reallocation of production towards the sector that uses intensively the country's most abundant factor. The resulting change in relative labor demand impacts wage bargaining in the unionized sector, which, in turn, has a dampening e ect on the Stolper- Samuelson e ect. Moreover, wages of unionized workers are even less responsive to trade liberalization. Through traditional mandated-wages regressions, we show that skilled-wage diferentials changes were less pronounced among more unionized sectors in the U.S. economy for the 1979-1990 period.

Keywords: Stolper-Samuelson Theorem; wage bargaining; unionization (search for similar items in EconPapers)
JEL-codes: F16 J31 J51 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-04
New Economics Papers: this item is included in nep-int and nep-lam
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.inesad.edu.bo/pdf/wp2014/wp03_2014.pdf

Related works:
Journal Article: Wage Differentials: Trade Openness and Wage Bargaining (2014)
Working Paper: Wage Differentials: Trade Openness and Wage Bargaining (2014)
Working Paper: Wage Differentials: Trade Openness and Wage Bargaining (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adv:wpaper:201403

Access Statistics for this paper

More papers in Development Research Working Paper Series from Institute for Advanced Development Studies Contact information at EDIRC.
Bibliographic data for series maintained by Lykke Andersen ().