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Wage Bargaining, Vertical Differentiation and Intra-industry Trade Liberalization

Published online by Cambridge University Press:  09 January 2015

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Summary

This article appraises the effects of trade liberalization between two industries that have different endowments of skilled labor. Skilled labor is necessary for the production of higher-quality variants of a vertically differentiated good. Skilled labor endowments, therefore, determine the patternof specialization of industries as well as their market structure, both in the final goods market and in the labor market. We analyze how market integration benefits or harms the agents in the industries by delving into the linkages between labor and product markets, and show that bilateral losses from trade can emerge at equilibrium.

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Research Article
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2013

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