Endogenous domestic market structure and the effects of a trade cost reduction in a unionised industry

Arijit Mukherjee

Economic Modelling, 2013, vol. 32, issue C, 30-33

Abstract: In contrast to the existing partial equilibrium literature considering the effects of a trade cost reduction on unionised wage under a given market structure, we show the effects by determining the domestic market structure endogenously. A lower trade cost reduces the number of active domestic firms, but it increases unionised wage in the active domestic firms under decentralised unions. Although a lower trade cost increases wage in the active domestic firms, it reduces domestic employment and total union utility at the free entry equilibrium. So, a trade cost reduction benefits domestic employed workers by increasing the unionised wage, but its effect on the total domestic workers is not favourable. If there is a centralised union, a lower trade cost reduces the number of active domestic firms, unionised wage, domestic employment and union utility.

Keywords: Free entry; Labour union; Trade cost (search for similar items in EconPapers)
JEL-codes: F12 J50 L11 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:32:y:2013:i:c:p:30-33

DOI: 10.1016/j.econmod.2013.01.020

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