Labor Market Power and the Distorting Effects of International Trade

Matthias Mertens

No 2018.05, Working Papers from International Network for Economic Research - INFER

Abstract: This article examines how trade shocks shape labor market imperfections that create market power in labor markets and prevent an efficient allocation of labor. I develop a framework for measuring such labor market distortions in monetary terms and document large degrees of those distortions in Germany’s manufacturing sector. Import competition can only exert labor market disciplining effects when firms rather than workers have labor market power. Otherwise, export demand and import competition shocks tend to fortify existing distortions by amplifying labor market power structures. This diminishes the gains from trade compared to a model with perfectly competitive labor markets.

Keywords: International trade; market power; labor markets; allocative efficiency (search for similar items in EconPapers)
JEL-codes: D F J L (search for similar items in EconPapers)
Pages: 65 pages
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Labor market power and the distorting effects of international trade (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:inf:wpaper:2018.05

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