Wage Policy in a Global World

This thesis contains an extended literature review and three essays on the interaction of globalization and wage policy, employment, income distribution and welfare. A specific focus lies thereby on the role of trade unions as one major labor market institution. A brief introductory chapter motivates the general topic before an extended literature review highlights main findings from previous studies. The first essay sets up a multi-sector general oligopolistic equilibrium trade model in which all firms face wage claims of firm-level unions. By accounting for productivity differences across industries, the model features income inequality along multiple lines, including inequality between firm owners and workers as well as within these two groups of agents, and involuntary unemployment. This setting is used to study the impact of trade liberalization on key macroeconomic performance measures. In particular, the study shows that a movement from autarky to free trade with a fully symmetric partner country lowers union wage claims and therefore stimulates employment and raises welfare. Whether firms can extract a larger share of rents in the open economy depends on the competitive environment in the product market. Furthermore, the distribution of profit income becomes more equal when a country opens up to trade with a fully symmetric trading partner. It is also shown how country size differences and technological dissimilarity of trading partners affect the results from the analysis. The second essay also builds upon the framework of general oligopolistic equilibrium with two countries that, however, differ in the centralization of union wage setting. Being interested in the consequences of openness, this study shows that, in the short-run, trade increases welfare and employment in both locations, and it raises income of capital owners as well as workers. In the long run, capital outflows from the country with the more centralized wage setting generate winners and losers and make the two countries more dissimilar in terms of unemployment and welfare. Decentralization of wage setting can successfully prevent capital outflow and the export of jobs. The third and final essay is of an empirical nature and investigates the role of wages as a potential driving force for German export activity. In the past 15 years Germany has been characterized by a strong export activity while at the same time initiating structural reforms on the labor market. It is often argued that German firms and plants are particularly successful in exporting since they are very competitive internationally. By computing unit labor costs as a measure of international competitiveness based on OECD STAN data and the IAB establishment panel this study investigates the role of unit labor costs for the decision to export. The results show that (i) German plants’ export intensity is positively correlated with competitiveness and (ii) that the relationship is spuriously driven by a non-industry specific common time trend. The study furthermore applies a corner solution model that allows to disentangle the total effect into its effect at the extensive and intensive margin of trade. Results indicate a positive and significant effect of competitiveness at both margins but the effect turns out insignificant before the introduction of the Euro.

Level thesis:degree_level

thesis.doctoral

Grantor dc:publisher

Universität Bayreuth

Year

2013

Author dc:creator

• Etzel, Daniel

Contributors dc:contributor

• Egger, Hartmut

Repository record source_url

https://epub.uni-bayreuth.de/id/eprint/81/

OAI identifier oai:identifier

oai:epub.uni-bayreuth.de:81