TY  - RPRT
        AU  - Persyn, Damiaan
        TI  - Trade as a Wage Disciplining Device
        PY  - 2008/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 3786
        UR  - https://www.iza.org/publications/dp3786
        AB  - We estimate how trade openness affects the relationship between wages, labour productivity and foreign wages using sector-level time series for several EU member states. In some countries wages became less responsive to foreign wages as trade costs declined. We show this counter-intuitive result is as expected when wages are set by a monopoly union with a preference for wages relative to employment. Trade liberalisation then leads to more wage discipline by forcing unions to set wages more in line with labour productivity. Foreign wages simultaneously become less relevant. Our results call to rethink how trade liberalisation is affecting unionized labour markets, and offer a possible explanation for the mixed evidence found by some tests for international factor price convergence.
        KW  - unions
KW  - globalisation
KW  - economic geography
KW  - factor price equalisation
        ER  -