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| Author: | Rocha-Akis, S. Schöb, R. |
| Title: | Welfare policy in the presence of unionised labour and internationally mobile firms |
| Journal: | Scandinavian Journal of Economics
2011 : VOL. 113:1 p. 93-119 |
| Index terms: | offshore industry imports unemployment pay oligopoly models |
| Language: | eng |
| Abstract: | To what extent does the welfare state exacerbate the loss of jobs due to offshoring? This paper proposes a model with oligopolistic sectors exposed to offshoring, as well as a unionised labour force entitled to unemployment benefits. It is found that deeper economic integration induces wage moderation to the point that wages become independent of workers' outside options. Because the entire incidence of redistribution falls on net wages, the unions' willingness to moderate wages is constrained by the level of redistribution. Beyond an upper limit of redistribution, extending the welfare state compels unions to oppose wage moderation at the cost of losing jobs to offshoring. |
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