Union Behavior, Industry Rents, and Optimal Policies

December 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the supposed welfare gains from strategic trade and industrial policies in the U.S. steel industry. Strategic policies to capture labor rents lead to an endogenous response which greatly diminishes their importance. On the other hand, reducing domestic labor market distortions results in welfare gains nearly as large as those from optimal trade and industrial policies. The paper concludes that the focus on labor rents as the subject of U.S. trade and industrial policy is overstated, at least in manufacturing industries such as integrated steel.

Subject: Capacity utilization, International trade, Labor, Labor share, Production, Trade policy, Wages

Keywords: Capacity utilization, cost function, EU firm, Europe, factor market, firm behavior, input mix, labor rent, Labor share, market power, Trade policy, Wages, welfare gain, WP

Pages:
31
Volume:
1996
DOI:
https://doi.org/10.5089/9781451856293.001
Issue:
143
Series:
Working Paper No. 1996/143
Stock No:
WPIEA1431996
ISBN:
9781451856293
ISSN:
1018-5941

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