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International Trade, Union Wage Premia, and Welfare in General Equilibrium

26 Pages Posted: 8 Apr 2011  

Udo Kreickemeier

University of Tuebingen; CESifo (Center for Economic Studies and Ifo Institute)

Frode Meland

University of Bergen - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2011

Abstract

We study how two distinct forms of globalisation, trade cost reductions and opening up of trade in previously shielded sectors, affect sector-specific wages, employment levels and aggregate welfare in a two-country model of general oligopolistic equilibrium (GOLE) with partly unionised labour markets. We find that both forms of globalisation increase union coverage, and they also lead to a lower union wage premium in shielded sectors. In contrast, the union wage premium in open sectors and aggregate welfare are affected differently by the two types of globalisation. Trade cost reductions in open sectors always lead to higher union wage premia and to lower aggregate welfare, while an increased number of open sectors lowers the union wage premium, and it may also increase welfare.

Keywords: globalisation, unions, non-traded goods, general oligopolistic equilibrium

JEL Classification: F120, F150, F160

Suggested Citation

Kreickemeier, Udo and Meland, Frode, International Trade, Union Wage Premia, and Welfare in General Equilibrium (March 31, 2011). CESifo Working Paper Series No. 3407. Available at SSRN: https://ssrn.com/abstract=1803126

Udo Kreickemeier (Contact Author)

University of Tuebingen ( email )

DE-72074 Tubingen
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Frode Meland

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen
Norway
+47 5 558 9230 (Phone)
+47 5 558 9210 (Fax)

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