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Title: Union wage demands with footloose firms
Authors: Persyn, Damiaan
Issue Date: 2009
Publisher: KULeuven LICOS
Series Title: Discussion paper series 228/2009 pages:1-27
Abstract: This paper analyses the wage demands of a sector-level monopoly union facing internationally mobile firms. A simple two-country economic geography model is used to describe how firms relocate in function of international differences in production costs and market size. The union sets wages in function of the firm level labour demand elasticity and the responsiveness of firms to relocate internationally. If countries are sufficiently symmetric lower foreign wages and lower trade costs necessarily lead to lower union wage demands. With asymmetric countries these intuitive properties do not always hold. But even for symmetric countries it holds that small increases in market size or trade costs makes union wages more sensitive to the foreign wage level.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:LICOS - Centre for Institutions and Economic Performance, Leuven
VIVES (Research Centre for Regional Economics), Leuven

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