The effects of union bargaining power and trade liberalization on industry selection are analysed within a two-country heterogeneous-firm model with firm-specific unions and inter-country asymmetries in size and union power. Union bargaining power is shown to have more nuanced effects on efficiency and welfare than what typically suggested by conventional wisdom. While the higher wages resulting from an unfavourable union power differential harm firms' competitiveness, by reinforcing standard market access mechanisms, they give rise to aggregate demand effects that can act as a catalyst for industry and result in a pro-variety effect.
(De)Unionization, Trade Liberalization and Selection
NOCCO, ANTONELLA
2015-01-01
Abstract
The effects of union bargaining power and trade liberalization on industry selection are analysed within a two-country heterogeneous-firm model with firm-specific unions and inter-country asymmetries in size and union power. Union bargaining power is shown to have more nuanced effects on efficiency and welfare than what typically suggested by conventional wisdom. While the higher wages resulting from an unfavourable union power differential harm firms' competitiveness, by reinforcing standard market access mechanisms, they give rise to aggregate demand effects that can act as a catalyst for industry and result in a pro-variety effect.File in questo prodotto:
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