Import Competition and Worker Productivity in Unionized Firms

Neil Campbell and Neil Vousden

Review of International Economics, 2000, vol. 8, issue 2, 193-207

Abstract: This paper analyzes the effects of trade and labor market liberalization on wages and worker productivity/effort in a domestic unionized firm with firm‐union bargaining over wages and effort. It is shown that both types of liberalization will induce a ‘cold shower effect’ (a rise in effort) if the union’s objective function is more heavily weighted towards employment. However, the welfare effects of the two policies can differ markedly. The paper also identifies a separate productivity cost of protection associated with the distortionary effect of protection on worker effort.

Date: 2000
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