Labor Unions, Globalization, and Mercantilism

Wolf-Heimo Grieben and Fuat Sener

No 2889, CESifo Working Paper Series from CESifo

Abstract: We analyze the growth and welfare effects of globalization in a dynamic Schumpeterian North-South product-cycle model. Economic growth is driven by R&D activities of Northern entrepreneurs. Top Northern production technologies are imitated by the South. In the North, there is wage bargaining between a labor union and firms, and a minimum wage rate exists. Unilateral Northern trade liberalization reduces the rate of innovation, increases Northern unemployment, and reduces both Northern and Southern per-capita welfare. The effects are reversed in the case of unilateral Southern trade liberalization. Hence, wage bargaining above a given minimum wage promotes mercantilist behavior of developed countries.

Keywords: globalization; product cycle; endogenous growth; labor unions; minimum wage; mercantilism (search for similar items in EconPapers)
JEL-codes: F12 F43 J51 O31 O32 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2889

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