This paper is a first attempt to analyse the consequences of establishing the internal market when taking account of labour market effects of product market integration. Our main focus is on market power, and we show that both labour unions and firms may lose market power when product markets...

This paper analyses how job security policies, which in practice result in higher firing costs, affect long-run employment and investment in a two country model with free trade in goods and capital. The effects turn out to depend crucially on the preferences of trade unions, and in particular on...