Product Market Integration, Comparative Advantages and Labour Market Performance

Torben M. Andersen, Jan Rose Skaksen

Research output: Working paperResearch

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Abstract

In this paper, we set up a two-country general equilibrium model where trade unions have wage bargaining power. We show that a decrease in trade distortions inducing further product market integration gives rise to specialization gains as well as a labour market reform effect. The implications of the specialization gains are similar to an increase in labour productivity, whereas the labour market reform effect is similar to an increase in the degree of competition in the labour market. Wages, employment and welfare increase as a result of further product market integration. It is interesting to note that the labour market reform effect of product market integration is achieved despite an increase in the wage level.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDepartment of Economics. Copenhagen Business School
Number of pages28
Publication statusPublished - 2004
SeriesWorking Paper / Department of Economics. Copenhagen Business School
Number8-2004

Keywords

  • Trade frictions
  • Wage formation
  • Employment
  • Welfare gains

Cite this

Andersen, T. M., & Rose Skaksen, J. (2004). Product Market Integration, Comparative Advantages and Labour Market Performance. Department of Economics. Copenhagen Business School. Working Paper / Department of Economics. Copenhagen Business School, No. 8-2004