DP2990 Unionized Oligopoly, Trade Liberalization and Location Choice
|Author(s):||Kjell Erik Lommerud, Frode Meland, Lars Sørgard|
|Publication Date:||October 2001|
|Keyword(s):||foreign direct investments, trade liberalization, unionized oligopoly|
|JEL(s):||F15, F16, F21, J51, L13|
|Programme Areas:||Public Economics, International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=2990|
In a two-country reciprocal-dumping model, with one country unionized, we analyse 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.