The Effect of International Trade on Union and Nonunion Wage Differences

The Effect of International Trade on Union and Nonunion Wage Differences

This paper examines (i) the effect of international competition on union wages, union/non-union wage differences, and the real earnings of each type of labor; and (ii) the effect of unionization on the distribution of income. We also consider the effect of tariff protection on each type of labor It is shown that union and non-union workers may be affected differently by trade and international competition, and intuition based on traditional trade theory is sometimes contradicted. If tariff protect ion helps workers (through higher real wages) in the non-unionized sector, it does not follow that the same holds for union workers. The elasticity of factor substitution turns out to be crucial in characterizing how union wages behave.