Title: Trade policy versus competition policy: Substitutes or complements?
Authors: Vandenbussche, Hylke # ×
Issue Date: Dec-2000
Publisher: Kluwer academic publ
Series Title: Economist vol:148 issue:5 pages:625-642
Abstract: This paper deals with the difference between trade policy and competition policy for domestic prices, wages, and employment when product and labour markets are imperfectly competitive. We show that in the presence of country-specific institutions like trade unions, trade policy and competition policy are no longer substitutes in disciplining product and labour market distortions. While both domestic entry and foreign imports affect domestic price-cost margins, they differ in their effectiveness and their impact on the domestic labour market. The results in this paper suggest that enforcement of competition policy without a sufficient degree of openness to imports is typically not a first-best outcome. While domestic entry increases union welfare, foreign imports reduce it. Competition policy in the presence of labour unions is insufficient to reduce labour market distortions, while international competition reduces both labour and product distortions.
ISSN: 0013-063X
Publication status: published
KU Leuven publication type: IT
Appears in Collections:LICOS - Centre for Institutions and Economic Performance, Leuven
× corresponding author
# (joint) last author

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