Union wage-setting and international trade with footloose capital

Hartmut Egger () and Daniel Etzel ()

Regional Science and Urban Economics, 2014, vol. 48, issue C, 56-67

Abstract: This paper sets up a general oligopolistic equilibrium model with two countries that differ in the centralization of union wage-setting. Being interested in the consequences of openness, we show that, in the short run, trade increases welfare and employment in both locations, and it raises income of capital owners as well as workers. In the long run, capital outflows from the country with the more centralized wage-setting generate winners and losers and make the two countries more dissimilar in terms of unemployment or welfare. Decentralization of wage-setting can successfully prevent capital outflow and the export of jobs.

Keywords: General oligopolistic equilibrium; Union wage-setting; Asymmetric labor market institutions; Trade liberalization; Footloose capital; Decentralization in union wage-setting (search for similar items in EconPapers)
JEL-codes: F12 F16 J51 L13 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:48:y:2014:i:c:p:56-67

DOI: 10.1016/j.regsciurbeco.2014.04.008

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