This paper addresses the effects of product market integration on wages. We develop a two-country general equilibrium model of international trade with imperfectly competitive product markets and unionized labor markets. Integration is modelled as either a fall in fixed or variable trade costs....

This paper develops a two-country economic geography model with Cournot competition, where the labor markets are unionized so that trade unions bargain efficiently with each firm over wages and employment. Agglomeration forces are present due to wage premia obtained by the trade unions. It is...