Resource title

Product Market Integration, Comparative Advantages and Labour Market Performance

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Resource description

Product Market Integration, Comparative Advantages andLabour Market Performance*In a two-country model with trade driven by comparative advantages, it is considered howimperfectly competitive labour markets are affected by lower frictions in international goodstrade. Easier goods trading is equivalent to increased mobility of employment acrosscountries and thus a change in the trade-off between wages and employment faced by wagesetters. While the effects of product market integration on the trade-off between wages andemployment in general is ambiguous, it is shown that product market integration works like ageneral improvement in productivity via the specialization it allows through trade.Unambiguously, real wages and employment and welfare improve upon reductions in tradefrictions, and therefore workers are better off irrespective of whether the market power ofunions is enhanced or muted.JEL Classification: F15, J30, J50Keywords: trade frictions, wage formation, employment, welfare gains

Resource author

Torben M. Andersen, Jan Rose Skaksen

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Resource publish date

Resource language

eng

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application/pdf

Resource resource URL

http://hdl.handle.net/10398/7506

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