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Wage Bargaining, Vertical Differentiation and Intra-Industry Trade Liberalization

Emanuele Bacchiega ()

No 2013012, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper appraises the effects of trade liberalization between two industries with different endowments of skilled labor. Skilled labor is necessary for the production of higher-quality variants of a vertically differentiated good. Skilled labor endowments therefore determine the pattern of specialization of industries as well as their market structure, both in the market for the product and in the labor market. We analyze how market integration benefits (or harms) agents in specific industries by delving into the linkages between labor and markets for products, and show that bilateral losses from trade can emerge at equilibrium point.

Keywords: Vertical differentiation; Wage bargaining; Trade liberalization (search for similar items in EconPapers)
JEL-codes: L13 J51 F16 (search for similar items in EconPapers)
Date: 2013-03-01
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