Product market integration and endogenous bargaining structure

Abstract

This paper focuses on the effects of product market integration on wage-bargaining institutions in a one-way trade model of an international Cournot oligopoly. It shows that product market integration (i.e. a reduction in trade costs either from an arbitrary or from its optimal level) lowers the incentives to centralisation for home unions, given that firms always prefer decentralisation, making it more likely that a decentralised wage bargaining structure occurs in equilibrium.Bargaining institutions, unionised oligopolies, trade integration