Open Shop Unions and International Trade Liberalisation

This paper extends the international oligopoly model to the situation of bargaining with an open shop union. Within this setting, we are able to investigate the implications of different levels of union density for both the equilibrium trade regime and wages. We then use this model to examine the response of wages to product market integration in the presence of different levels of union density. We find that, with intermediate levels of union density, wages need neither to fall monotonically as trade liberalisation occurs, nor indeed to fall in absolute terms as an economy moves from autarky to free trade