The impact of trade on employment, welfare, and income distribution in unionized general oligopolistic equilibrium

Hartmut Egger () and Daniel Etzel ()

European Economic Review, 2012, vol. 56, issue 6, 1119-1135

Abstract: This paper sets up a multi-sector general oligopolistic equilibrium trade model in which all firms face wage claims of firm-level unions. By accounting for productivity differences across industries, the model features income inequality along multiple lines, including inequality between firm owners and workers as well as within these two groups of agents, and involuntary unemployment. We use this setting to study the impact of trade liberalization on key macroeconomic performance measures. In particular, we show that a movement from autarky to free trade with a fully symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether firms can extract a larger share of rents in the open economy depends on the competitive environment in the product market. Furthermore, the distribution of profit income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade with a fully symmetric trading partner. We also analyze how country size differences and technological dissimilarity of trading partners affect the results from our analysis.

Keywords: General oligopolistic equilibrium; Unionized labor market; Trade liberalization; Income distribution (search for similar items in EconPapers)
JEL-codes: F12 F16 J51 L13 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (50)

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Related works:
Working Paper: The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium (2010)
Working Paper: The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:6:p:1119-1135

DOI: 10.1016/j.euroecorev.2012.03.006

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