Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75031
Authors: 
Persyn, Damiaan
Year of Publication: 
2008
Series/Report no.: 
LICOS Discussion Paper 210
Abstract: 
We estimate how trade openness affects the relationship between wages, labour productivity and foreign wages using sector-level time series for several EU member states. In some countries wages became less responsive to foreign wages as trade costs declined. We show this counter-intuitive result is as expected when wages are set by a monopoly union with a preference for wages relative to employment. Trade liberalisation then leads to more wage discipline by forcing unions to set wages more in line with labour productivity. Foreign wages simultaneously become less relevant. Our results call to rethink how trade liberalisation is affecting unionised labour markets, and offer a possible explanation for the mixed evidence found by some tests for international factor price convergence.
Subjects: 
Unions
globalisation
economic geography
factor price equalisation
JEL: 
J50
J31
F16
Document Type: 
Working Paper

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