Product Market Integration and Wages in Unionized Countries

This paper addresses the effects of product market integration on wages. We develop a two–country general equilibrium model of international trade with imperfectly competitive product markets and unionized labor markets. Integration is modelled as either a fall in fixed or variable trade costs. A reduction in fixed trade costs leads to an unambiguous decrease in wages, whereas a reduction in variable trade costs has an ambiguous effect on wages.
JEL classification : F 15; J 5; L 13     

The Location of Firms in Unionized Countries*

This paper develops a two‐country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is shown that if the bargaining power of unions differs across countries then, as trade costs are reduced, the country with relatively weak unions gradually acquires all firms. However, for a range of trade costs, it is also a locally stable equilibrium for all firms to locate in the country with strong unions.     

Aid for trade and the quality of exports

This article studies how aid for trade (AfT) affects the quality of recipient countries’ exports. It shows that the quality effect is most discernible for AfT for assistance in trade policy: a 50% increase in the value of AfT received in this category is associated with a 0.5–1% increase in the quality of exports to the donor and other OECD countries. On average, the actual AfT received for assistance in trade policy leads to a 2% upgrade of the recipient country in the quality ladder of all developing countries. Around half of this quality effect is driven by the quality improvement of continued products in continued markets (intensive margin), and the other half by the quality upgrading of new products in continued markets and existing products in new markets (extensive margin).     

Trade Sanctions and the Incidence of Child Labor

The purpose of this paper is to develop an imperfect competition model of a small open developing country to analyze the effects of trade sanctions on the incidence of child labor. We show that a uniform tariff levied by the developed countries on imports produced with the help of child labor is a failure in terms of reducing child labor. A more effective course of action would be a firm‐specific tariff where the tariff rate varies with the amount of child labor incorporated in a single good. While such an instrument reduces child labor, however, it worsens the children’s well‐being due to lower income and consumption. Contrary to expectations, the entrepreneurs in the developing countries, supposedly the main beneficiaries of child labor, are better off under trade sanctions as they realize higher profits.     

Trade with Time Zone Differences: Factor Market Implications

The main purpose of this study is to illustrate, with a simple two‐factor (skilled and unskilled labor) model, how a time‐saving improvement in business‐services trade benefitting from differences in time zones can have an impact on national factor markets. In doing so, we intend to capture the situation where the night‐shift work in one country is replaced by the day‐shift work in another country. In other words, we will show that trade with time zone differences will result in shifts of the relative supplies and demands for skilled labor around the globe.     

Foreign Direct Investment and Labor Quality in Developing Countries

The quality of local labor is an important factor in a multinational corporation's (MNC) decision to set up production operations in a developing country. It is often observed that developing country governments attempt to attract MNCs by enhancing labor quality. This paper studies the interaction between an MNC and a local government which has superior information on local labor quality. The local government has an incentive to enhance the labor quality and share that information with the MNC because it increases both its net tax revenue and profit of the MNC. The paper provides an explanation for recent findings of FDI in developing countries: the bulk of FDI has been directed toward a limited number of countries and human capital plays an increasingly important role in attracting FDI.     

Political Economy of Trade Openness and Government Size

This paper proposes a theoretical model that may provide useful insights into the relationship between trade openness and the size of government, as well as a possible explanation for the results of empirical tests of such a relationship. We develop a Hecksher–Ohlin model with publicly provided goods, where the level of publicly provided goods is determined in a probabilistic voting framework. In this context, we show that the start of trade may increase or decrease government size depending on the capital‐labor ratio in each country.     

Networks of Free Trade Agreements among Heterogeneous Countries

The paper examines the formation of free trade agreements as a network formation game. We consider an n‐country model in which international trade occurs between economies with imperfectly competitive product markets. In each country, the labor market is either unionized or non‐unionized. We show that, if all countries are non‐unionized, the global free trade network is both the unique pairwise stable network and the unique efficient network. If all countries are unionized, the global free trade network is pairwise stable and the unique efficient network among the class of symmetric networks. If some countries are unionized while others are non‐unionized, other networks apart from the global free trade network may be pairwise stable. However, the efficient network is still the global free trade network. Thus, a conflict between stability and efficiency may occur. Moreover, starting from the network in which no country has signed a free trade agreement, all sequences of networks due to continuously profitable deviations do not lead (in most cases) to the global free trade network, even when global free trade is stable.     

国际贸易中的劳工、环境标准之争及发展趋势

近年来,发达国家与发展中国家就国际贸易中劳工、环境标准问题的争论愈加激烈.本文分劳工、环境标准的"公平贸易"之争、WTO引入劳工、环境标准的"合理性"之争两方面对此进行了评述,并预测了其发展趋势.文章认为,劳工、环境标准与国际贸易挂钩是迟早的事.我们一方面需防止贸易伙伴国出于贸易保护需要对劳工、环境标准的滥用;同时应积极主动地运用国际公认的劳工、环境标准,以提升我国产品的国际竞争力.     

Market Size and Economic Integration when Labor Markets are Unionized

The paper explores the effects of economic integration on trade, wages, and welfare when market sizes differ. A duopoly model with two‐way intraindustry trade in similar products and with unionized labor markets is employed. It is confirmed that, for a wide range of different relative market sizes, integration leads to higher wages, employment, and welfare. However, where market sizes differ widely, the reduction of trade barriers leads to a reduction of wages, employment, and—in some circumstances—welfare in the country with the large market.     

Free-Trade Agreements in a Model of Trade,Migration and Politics

This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated.     

Economic recession, skilled unemployment and welfare

The paper develops a three-sector, specific factor, general equilibrium model with two high-skill sectors and unemployment of skilled labor. One of the two high-skill sectors produces a non-traded commodity whose aggregate demand consists of both domestic demand and an exogenously given foreign demand. The consequences of a decline in the foreign demand for the non-traded good resulting from worldwide economic recession on the skilled and unskilled labor markets in a developing economy have been examined. The analysis finds that the effects on the labor markets crucially hinge on the relative factor intensities of the two high-skill sectors and that through the adoption of appropriate fiscal measures; the country can shield its workforce from the rage of global economic downturn.     

Why should Southern economies stay in the Euro Zone? The role of labor markets

We assume a world of two countries in a fixed exchange rate system. These countries differ in the features of their labor markets. The home country is characterized by a dual labor market, with formal and informal sectors. In the foreign country, a nominal wage rigidity exists. In this context, the situation of the labor markets in each country is not optimal owing to a misallocation of workers between sectors in the domestic economy and unemployment in the foreign economy. We show that a devaluation of domestic currency implies a fall in production in each country and deterioration of labor markets in both countries.     

无配额时代中美欧纺织品贸易状况及我国的对策

我国是一个发展中大国,劳动力资源丰富。在出口贸易中,纺织品一直是我国最具竞争力的出口产品之一。随着纺织品配额全部取消,来自美国及欧洲一些国家的不公平限制是不可避免的。因此,纺织品贸易将成为未来我国与欧美国家之间争论的焦点问题。     

Intra-Industry specialization: A cross-country analysis

This paper tests various hypotheses as to the determinants of intra-industry trade in thirty-eight developed and developing countries exporting manufactured goods. The econometric estimates for the entire group of countries show that the extent of intra-industry trade increases with the level of economic development (GNP per head), the size of domestic markets (GNP), and the openness of national economies. The existence of trading partners with common borders and geographical proximity further contributes to intra-industry trade.These hypotheses have also been confirmed for the developing country group. And while similarities in regard to trade orientation and the existence of border trade, as well as intercorrelation between the gross national product and per capita GNP, have reduced the statistical significance of the regression coefficients for these variables for the developed country group, this equation also has a high explanatory power.     

The direction of developing country trade: Empirical evidence of differences between South-South and South-North trade

Declining market opportunities in Northern markets led to views that greater South-South trading might provide an alternative growth stimulus. This paper analyses the characteristics of South-South trade in manufactures and recent changes in the level of such trade to help clarify the potential of greater self-reliance within the South. South-South trade is found to be more intensive in the use of both physical and human capital, hence less rational from the static comparative advantage viewpoint than South-North trade. There is indirect but strong evidence that exporting countries with greatest orientation towards the South are those with greater distortions, less rapid movements up the ladder of comparative advantage, and weaker export performance. Finally, it is observed that the recent boom in South-South trade is largely explained by simple market size effects: very rapid growth of rich oil-exporters and the faster GNP growth of developing compared to developed countries. The paper concludes that while South-South trade of about the present magnitude-one of greater developing country exports - is certainly rational, there is little evidence to support views that greater South-South trade should be especially promoted. Arguments of dynamic comparative advantage may favor South-South trade, but so far these have been more speculative and not yet well researched empirically.     

Impact of international trade under dual labor markets

A country's unemployment rate can be affected by technology choice and the opening of international trade. This general equilibrium model examines the impact of international trade with the presence of dual labor markets in which manufacturing firms engage in oligopolistic competition and choose technologies with different marginal and fixed costs to maximize profits. In a closed economy, it is shown that an increase in labor market efficiency or a population increase induces manufacturing firms to adopt more advanced technologies and the wage rate in the manufacturing sector increases. With the existence of a continuum of technologies, technology choice is not a source of firm heterogeneity. The opening of international trade leads to an increase in the wage rate in the manufacturing sector and the price of the agricultural good. When countries are identical, international trade always increases national welfare.     

Free Trade and Economic Growth

This paper extends the Das (2005) model to set up an equilibrium growth model with heterogeneous labor to analyse the growth effects after trade openness. We prove that if the terms of trade large enough before opening trade, then it is more likely that opening trade would accelerate economic growth for a small open country, vice versa.     

分工演进对贸易政策的影响分析——基于交易成本的考虑

贸易政策同贸易理论是紧密联系在一起的.引入交易成本来分析分工演进对贸易政策的影响,不考虑交易成本条件下,贸易自由对于分工演进的国家是有利的;考虑交易成本条件下,随着分工演进,国家之间更加倾向于贸易谈判,最终结果为贸易自由化.但是由于各国交易效率不同,交易效率高的国家在贸易中获得的利益更多,而交易效率低的就会实行更多贸易保护.因此,我国需要降低交易成本,加强分工演进的速度,处理好国际之间的贸易摩擦.     

Recent trends in trade among developing countries

The paper presents the early results of empirical work on trade among developing countries. The main conclusion is that non-fuel trade among developing countries, excluding capital surplus oil exporters, remained a remarkably stable share of their total trade between 1963 and 1977. This constancy does, however, conceal two interesting opposing trends: The share of manufactures exported to developing countries has been falling sharply, while that of non-fuel primary commodities has been rising, the latter largely because of the demands of the newly industrializing countries. Nevertheless, the dynamism of manufactures has meant that they make up an increasing share of trade among developing countries. Four particular points emerge from the evidence: (i) there is no obvious sign of a bias against trade among developing countries, except whatever effect their own commercial policies may have; (ii) the more inward-looking countries tend to send a higher proportion of their exports to other developing countries and regional integration strengthens this effect; (iii) exports of manufactures to developing countries are much more capital intensive than those to industrialized countries; and (iv) exports to developing country markets may not be the vital first stage for capital goods exports that is sometimes supposed.