Trade Policy and Wages when Firms can delocalize Production

Alessandro Turrini

No 1995074, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Empirical analysis has shown that oligopolistic rents are not generally fully translated into profits, but are instead shared between firms and workers. This evidence has implications for the desirability of trade intervention. The crucial point for the analysis is to know how wages react to subsidies and trade barriers. We investigate this issue by means of a union-firm bargaining model in which firms can (costly) delocalize production. The counter-intuitive result is that in most of the cases trade policies reduce wages, thus enhancing the desired effect on output.

Date: 1995-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1995074

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