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Labor market power and the distorting effects of international trade

Matthias Mertens

International Journal of Industrial Organization, 2020, vol. 68, issue C

Abstract: This article examines how final product trade with China shapes and interacts with labor market imperfections that create market power in labor markets and prevent an efficient market outcome. I develop a framework for measuring such labor market power distortions in monetary terms and document large degrees of these distortions in Germany's manufacturing sector. Import competition only exerts labor market disciplining effects if firms, rather than employees, possess labor market power. Otherwise, increasing export demand and import competition both fortify existing distortions, which decreases labor market efficiency. This widens the gap between potential and realized output and thus diminishes classical gains from trade.

Keywords: Labor market power; Labor market efficiency; International trade; Production function estimation (search for similar items in EconPapers)
JEL-codes: D24 F14 F16 J50 L13 L60 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Labour market power and the distorting effects of international trade (2019) Downloads
Working Paper: Labor Market Power and the Distorting Effects of International Trade (2018) Downloads
Working Paper: Labour market power and the distorting effects of international trade (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:68:y:2020:i:c:s0167718719300906

DOI: 10.1016/j.ijindorg.2019.102562

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