Abstract
We present a model of the effect of heightened product market competition induced by trade liberalization on the distribution of income between profits and wages. Integration increases the employment cost of wage demands, thereby decreasing bargained wages and the share of rents accruing to workers. This effect is amplified because of the existence of strategic complementarities which bring about a race to the bottom. Wage discipline induced by trade liberalization reduces the negative impact of increased competition on firm rents, and may even raise profits.
Full Text 
Sign-in/Register to access full text options
Sign-in/Register to access full text options 
Published version (
Free)
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
