Unionized Oligopoly, Trade Liberalization and Location Choice
31 Pages Posted: 24 Oct 2001
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Unionized Oligopoly, Trade Liberalization and Location Choice
Date Written: October 2001
Abstract
In a two-country reciprocal-dumping model, with one country unionized, we analyze how wage setting and firm location are influenced by trade liberalization. We show that trade liberalization can induce a unionized firm to move all production abroad. This cannot prevail in a corresponding, non-unionized model. Trade liberalization has a non-monotonic effect on wages. For a given location choice, trade liberalization increases national welfare in the unionized country. When a shift of some or all production to the foreign country occurs, national welfare can be reduced.
Keywords: Unionized oligopoly, trade liberalization, foreign direct investments
JEL Classification: F15, F16, F21, J51, L13
Suggested Citation: Suggested Citation
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