Labour Market Power and the Dynamic Gains to Openness Reforms

Arbeitspapier

We develop a dynamic general equilibrium framework with firm heterogeneity and monopsonistic labour markets, for quantification of the impact of trade and FDI liberalisation episodes. Firms make standard extensive margin investment choices into exporting and multinational statuses. The labour market features upward-sloping supply curves and love of variety in employment. These features interact with the variable-fixed cost tradeoff of outward activity. We calibrate the model to U.S. data and study the effect of reductions in tariffs and outward FDI taxes in both bilateral and unilateral contexts, examining steady state and transitional effects. We compare the predictions of this model with a more standard version with perfectly competitive labour markets. Our headline finding is that the model with labour market power gives substantially different quantitative estimates to the perfectly competitive version. For instance, a bilateral trade liberalisation gives welfare gains that are over 10 times larger in the presence of monopsony power. Significant quantitative differences persist with a variety of robustness exercises.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 10247

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade Policy; International Trade Organizations ; Trade and Labor Market Interactions ; Multinational Firms; International Business ; Macroeconomic Aspects of International Trade and Finance: General ; Business Taxes and Subsidies including sales and value-added (VAT)
• Thema: monopsonistic labour market ; trade liberalisation ; love of firm variety ; dynamics ; foreign direct investment ; corporate taxation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Jha, Priyaranjan ; Rodríguez López, Antonio ; Spencer, Adam Hal
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/271891
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ