International Trade and Labour Markets

This dissertation consists of four essays that contribute to the literature on international trade and labour markets. The first essay studies the interaction between economic integration, product and process innovation, and relative skill demand in a model of international oligopoly. As trade barriers are dismantled foreign competition intensifies. Competing enterprises respond by investing more aggressively in both product and process innovation. The relative demand for unskilled workers decreases as a result. The second essay studies labour market outcomes in a model of intra-industry trade between a rigid-wage Europe and a flexible-wage America. Firms can choose to serve the foreign market either through exports or through local subsidiaries. The essay demonstrates that the adverse employment effects of a unilateral wage floor increase significantly when trade barriers are removed. Multinational firms mitigate the adverse employment effects of one-sided wage rigidity. The third essay analyses how different unionisation structures affect firm productivity and firm performance in a monopolistic competition model with heterogeneous firms and free entry. While centralised bargaining induces tougher selection among heterogeneous producers and increases average productivity and profit levels, firm-level bargaining allows less productive entrants to remain in the market. The positive effect of centralised bargaining on average productivity can, however, be overturned when firms face international low-wage competition. Finally, the fourth chapter analyses empirically the effect of offshoring on workers’ labour market transitions in Germany. The results suggest that the effects of offshoring are strongly ageand skill-specific and also vary between sectors. While offshoring does not affect overall job stability in the manufacturing sector, it is associated with an increase in overall job stability in the service sector.