Trade liberalisation and union wages in a differentiated Bertrand duopoly

Nicole Gürtzgen
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Nicole Gürtzgen: University of Rostock

No 28, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics, Germany

Abstract: In a framework of a unionised international Bertrand duopoly with differentiated products, this paper analyses national labour market interdependencies and the consequences of trade liberalisation for union wages. The analysis suggests that national wages are likely to be strategic complements (substitutes), if products are ordinary substitutes (complements). Under the assumption of linear demand it is shown that bilateral trade liberalisation always leads to higher union set wages and union utilities, regardless of the nature of product rivalry. Analysing the consequences of unilateral tariff reductions it is shown that foreign tariff reductions always give rise to higher union wages and utilities, whereas the impact of unilateral domestic tariff reductions depends an the nature of product rivalry.

Keywords: Trade unions; Oligopoly; Intra-industry trade; Market integration (search for similar items in EconPapers)
JEL-codes: F12 J50 L13 (search for similar items in EconPapers)
Date: 2001

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Persistent link: http://EconPapers.repec.org/RePEc:ros:wpaper:28

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