Product Market Integration, Wage Bargaining and Strike Activity

Mauleon, Ana [FUSL] Vannetelbosch, Vincent [UCL]

We develop a spatial two-country model of wage determination with private information in unionized imperfectly competitive industries. We investigate the effects of separated product markets opening up for competition aswell as further market integration on the negotiated wage and the strikeactivity. We show that, when product markets are separated, the wagelevel and the strike activity are decreasing with the transportation costand the home market size. However, when markets are integrated, wagesand strikes are now increasing with the transportation cost. Finally,we find that the opening of markets for competition has an ambiguous impacton both the negotiated wage and the strike activity.