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The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium

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  • Hartmut Egger
  • Daniel Etzel

Abstract

This paper sets up a general oligopolistic equilibrium model with unionized labor markets. By accounting for productivity di erences, the model features pro t and wage di erentials across industries. We use this setting to study the impact of trade liberalization on employment, welfare, and the distribution of income. In particular, we show that a movement from autarky to free trade with a symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether rms can extract a larger share of rents in the open economy depends on the competitive environment as well as on the degree of centralization in union wage setting. Finally, the distribution of proft income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade.

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  • Hartmut Egger & Daniel Etzel, 2010. "The Impact of Trade on Employment, Welfare, and Income Distribution in Unionized General Oligopolistic Equilibrium," Working Papers 088, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:088_egger
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    More about this item

    Keywords

    General oligopolistic equilibrium; Unionized labor market; Trade liberalization; Income distribution;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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