@TechReport{iza:izadps:dp748,
            	author={Pflüger, Michael P.},
            	title={Economic Integration, Wage Policies and Social Policies},
            	year={2003},
	month={Apr},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={748},
            	url={https://www.iza.org/publications/dp748},
	abstract={This paper uses a two country trade and geography model of monopolistic competition to
study the effects of wage policies and social policies on the location of industry. It is first
shown that a union wage push in one of two otherwise identical countries induces a
relocation of firms which increases with the level of economic integration as measured by
trade costs. This 'traditional view' is then contrasted with a 'new economic geography view' in
which one of the countries has historically emerged as the core. The agglomeration rent
which accrues to the mobile factor gives unions and governments in the core scope to set
higher wages and to choose more generous welfare policies than their counterparts in the
periphery without having to encounter an exit of firms. The relationship between the
maximum international union wage differential and the level of integration is shown to be bellshaped.},
	keywords={monopolistic competition;integration;wages;industry location;agglomeration},
            }