Market Size and Economic Integration when Labor Markets are Unionized

Andromachi S. Piperakis, Robert C. Hine and Peter William Wright ()

Review of International Economics, 2003, vol. 11, issue 3, pages 483-494

Abstract: The paper explores the effects of economic integration on trade, wages, and welfare when market sizes differ. A duopoly model with two-way intraindustry trade in similar products and with unionized labor markets is employed. It is confirmed that, for a wide range of different relative market sizes, integration leads to higher wages, employment, and welfare. However, where market sizes differ widely, the reduction of trade barriers leads to a reduction of wages, employment, and-in some circumstances-welfare in the country with the large market. Copyright Blackwell Publishing Ltd 2003.

Date: 2003
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