Inderscience Publishers

The sustainability of unions' wage coordination in an integrated economy

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In a two–country duopoly model with integrated product markets, this paper investigates the incentives for unions to coordinate wage demands in the presence of transaction costs, and the sustainability of unions' wage collusion. Contrary to conventional wisdom that wage collusion is always welfare–detrimental, this work shows that wage coordination in the presence of low minimum wages may lead, from a social point of view, to a Pareto superior outcome with respect to separate wage settings with relatively high minimum wages.

Keywords: international production, wage coordination, labour unions, sustainability, sustainable development, trade unions, duopoly modelling, integrated product markets, wage demands, transaction costs, wage collusion, minimum wage

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