Economic Integration, Market Power and Technological Change

Tapio Palokangas

No 1592, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine a common market which expands by integrating new regions. Capitalists are strategically interdependent through the goods market and they improve their productivity through R&D. Production and R&D employ unionized workers. The purpose of integration is to maximize a weighed average of workers' and capitalists' utilities. The main findings are as follows. Integration benefits capitalists more than workers. If labour unions are strong enough, then the common market can expand indefinitely. Otherwise, there is an upper limit for integration. This is the higher, the higher producer market power or the stronger the capitalists' political influence.

Keywords: endogenous growth; economic integration; market power (search for similar items in EconPapers)
JEL-codes: F15 J50 O40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-05
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