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Strategic trade policy and union-firm bargaining agenda

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  • Luciano Fanti
  • Domenico Buccella

Abstract

In this paper, we revisit the issue of the scope of bargaining between duopolistic firms and unions in an open economy with strategic trade policy. It is shown that, in contrast with the case of the absence of export tax/subsidy, a right-to-manage (RTM) arrangement always emerges endogenously as a sub-game perfect Nash equilibrium in agreement between parties. Moreover, such an arrangement may be also Pareto-optimal in both exporting countries in the sense that profits, workers' welfare (provided that union's power is sufficiently high) and social welfare as a whole are higher than the efficient bargaining (EB) arrangement. Moreover, since the government of the country in which there is EB (while in the other country the alternative agenda RTM is used) levies a tax on export, then the conventional result that under quantity competition it is always optimal for exporting countries to subsidise exports may be reversed.

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2016. "Strategic trade policy and union-firm bargaining agenda," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(6), pages 787-808, September.
    • Handle: RePEc:taf:jitecd:v:25:y:2016:i:6:p:787-808
    DOI: 10.1080/09638199.2015.1130078
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    Cited by:

    1. Domenico Buccella & Luciano Fanti, 2017. "A game-theoretic approach to the choice of union-oligopoly baargaining agenda," Discussion Papers 2017/214, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. Lee, Chien-Hui & Lee, Jen-Yao & Wang, Leonard F.S., 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.
    3. Fanti, Luciano & Buccella, Domenico, 2016. "Passive unilateral cross-ownership and strategic trade policy," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-22.
    4. Fanti, Luciano & Buccella, Domenico, 2020. "Strategic Trade Policy with Asymmetric Bargaining Agenda," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 257-274.

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