The impact of trade on employment, welfare, and income distribution in unionized general oligopolistic equilibrium
This paper sets up a multi-sector general oligopolistic equilibrium trade model in which all firms face wage claims of firm-level unions. By accounting for productivity differences across industries, the model features income inequality along multiple lines, including inequality between firm owners and workers as well as within these two groups of agents, and involuntary unemployment. We use this setting to study the impact of trade liberalization on key macroeconomic performance measures. In particular, we show that a movement from autarky to free trade with a fully symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether firms can extract a larger share of rents in the open economy depends on the competitive environment in the product market. Furthermore, the distribution of profit income across firm owners remains unaffected, while the distribution of wage income becomes more equal when a country opens up to trade with a fully symmetric trading partner. We also analyze how country size differences and technological dissimilarity of trading partners affect the results from our analysis.
Year of publication: |
2012
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Authors: | Egger, Hartmut ; Etzel, Daniel |
Published in: |
European Economic Review. - Elsevier, ISSN 0014-2921. - Vol. 56.2012, 6, p. 1119-1135
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Publisher: |
Elsevier |
Subject: | General oligopolistic equilibrium | Unionized labor market | Trade liberalization | Income distribution |
Saved in:
Online Resource
Type of publication: | Article |
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Classification: | F12 - Models of Trade with Imperfect Competition and Scale Economies ; F16 - Trade and Labor Market Interactions ; J51 - Trade Unions: Objectives Structure, and Effects ; L13 - Oligopoly and Other Imperfect Markets |
Source: |
Persistent link: https://www.econbiz.de/10010597470