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Title:Product Market Integration, Comparative Advantages and Labour Market Performance PDF Logo
Authors:Andersen, Torben M.
Skaksen, Jan Rose
Issue Date:2003
Series/Report no.:IZA Discussion paper series 698
Abstract:In a two-country model with trade driven by comparative advantages, it is considered how imperfectly competitive labour markets are affected by lower frictions in international goods trade. Easier goods trading is equivalent to increased mobility of employment across countries and thus a change in the trade-off between wages and employment faced by wage setters. While the effects of product market integration on the trade-off between wages and employment in general is ambiguous, it is shown that product market integration works like a general improvement in productivity via the specialization it allows through trade. Unambiguously, real wages and employment and welfare improve upon reductions in trade frictions, and therefore workers are better off irrespective of whether the market power of unions is enhanced or muted.
Subjects:trade frictions
wage formation
employment
welfare gains
JEL:J30
J50
F15
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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