Labor unions, globalization, and mercantilism

We analyze the growth and welfare effects of globalization in a dynamic Schumpeterian North-South product-cycle model. Economic growth is driven by R&D activities of Northern entrepreneurs. Top Northern production technologies are imitated by the South. In the North, there is wage bargaining between a labor union and firms, and a minimum wage rate exists. Unilateral Northern trade liberalization reduces the rate of innovation, increases Northern unemployment, and reduces both Northern and Southern per-capita welfare. The effects are reversed in the case of unilateral Southern trade liberalization. Hence, wage bargaining above a given minimum wage promotes mercantilist behavior of developed countries.

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Year of publication:	2009
Authors:	Grieben, Wolf-Heimo ; Sener, Fuat
Publisher:	Munich : Center for Economic Studies and Ifo Institute (CESifo)
Subject:	globalization : product cycle \| endogenous growth \| labor unions \| minimum wage \| mercantilism

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Series:	CESifo Working Paper ; 2889
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	617261407 [GVK] hdl:10419/30534 [Handle]
Classification:	F12 - Models of Trade with Imperfect Competition and Scale Economies ; F43 - Economic Growth of Open Economies ; J51 - Trade Unions: Objectives Structure, and Effects ; O31 - Innovation and Invention: Processes and Incentives ; O32 - Management of Technological Innovation and R&D
Source:	EconStor