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Price and wage setting in an integrating Europe : firm level evidence

Author

Listed:
  • Filip Abraham

    (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven)

  • Jozef Konings

    (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven
    LICOS, Centre for Transition Economics; Katholieke Universiteit Leuven
    CEPR, London)

  • Stijn Vanormelingen

    (Faculty of Economics and Applied Economics, Katholieke Universiteit Leuven)

Abstract

Europe has witnessed the last decade an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states entered the European Union. Economic integration is likely to have an impact on both labor and product markets. Unlike most other papers, that focus on product and labor markets separately, we look at the link between globalization and product and labor market imperfections simultaneously. To this end, we rely on a rich panel of manufacturing firms in Belgium, a small open economy. We find that union bargaining power is higher in sectors characterized by high price cost margins. Moreover, ignoring imperfections on the labor market, leads to an underestimation of product market power. Concerning the influence of globalization, our main findings are that both price cost margins and union bargaining power are typically lower in sectors that are subject higher international competition. This result is especially true for competition from low wage countries

Suggested Citation

  • Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2006. "Price and wage setting in an integrating Europe : firm level evidence," Working Paper Research 93, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:200610-5
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    References listed on IDEAS

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    Cited by:

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    2. Jan Hagemejer & Michal Gradzewicz, 2007. "Impact of competition and business cycles on the behaviour of monopolistic markups in the Polish economy," EcoMod2007 23900034, EcoMod.
    3. Robert Anderton & Paul Hiebert, 2009. "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP.
    4. Geert Langenus, 2006. "Fiscal sustainability indicators and policy design in the face of ageing," Working Paper Research 102, National Bank of Belgium.

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    More about this item

    Keywords

    Mark-ups; Trade Unions; International Trade;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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