Odd Rune Straume

"International mergers and trade liberalisation: implications for unionised labour"
JEL codes: F23, J51, L13
Keywords: internaitonal merger, union wages, trade liberalisation

Abstract: An interntional oligpoly model with unionised and non-unionised firms is contructed to make predictions about the pattern of international mergers. Applying a method of endogenous merger formation developed by Horn and Persson (2001a), we find that the equilibrium market structure is highly dependent on the specifics of the trade cost structure. We consider the case of a symmetric trade cost structure, as well as the case of bilateral trade liberalisation. The model is further utilised to analyse the implications of trade liberalisation for unionised labour. A main finidng is that for sufficiently high levels of trade costs, unionised workers may benefit from merger between non-unionised firms, whereas low levels of trade costs make unionised firms highly `vulnerable` to international merger, which could be detrimental for the union's ability to capture oligopoly rents.