Economic Integration, Imperfect Competition, and International Policy Coordination

Bertil Holmlund and Ann-Sofie Kolm ()

Working Papers from Uppsala - Working Paper Series

Abstract: The paper examines policy externalities between imperfectly competitive open economies where unemployment prevails in general equilibrium. We develop a two-country and two-sector model with monopolistic competition in the goods market and wage bargaining in the labor market. Policy externalities operate through the real exchange rate and economic integration is modeled as a reduction in trade costs. We explore how market integration influences policy spillovers, employment and real wages. We also examine how national and supranational commodity tax policies affect sectoral and total employment. Finally, we characterize optimal commodity taxes with non-cooperative and cooperative policies and offer some rough estimates of the welfare gains from policy coordination, using a calibrated version of the model.

Keywords: ECONOMIC INTEGRATION; MARKET STRUCTURE; WAGES (search for similar items in EconPapers)
JEL-codes: D43 E61 F15 J23 J64 (search for similar items in EconPapers)
Date: 1999
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Working Paper: Economic Integration, Imperfect Competition, and International Policy Coordination (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:fth:uppaal:1999:7

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