The Impact of International Market Integration on Wages in Unionized Economy

Abstract

This paper developed a generalized model to analyze the relationship between product market integration and wages in the unionized labor market. By considering product market integration as a reduction in trade costs, we showed that product market integration has an ambiguous effect on wages determined by labor unions. A reduction in fixed trade costs leads to an unambiguous decrease in wages, while a reduction in variable trade costs has an ambiguous effects on wages.

This paper developed a generalized model to analyze the relationship between product market integration and wages in the unionized labor market. By considering product market integration as a reduction in trade costs, we showed that product market integration has an ambiguous effect on wages determined by labor unions. A reduction in fixed trade costs leads to an unambiguous decrease in wages, while a reduction in variable trade costs has an ambiguous effects on wages.