The labor market effects of trade unions in an open economy: Layard meets Melitz
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- de Pinto, M. & Michaelis, J. Int Econ Econ Policy (2016) 13: 223. doi:10.1007/s10368-014-0301-z
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Trade unions are typically able to convert their industrial power into political power. We show that, depending on the constellation of parameters, stronger trade unions may improve welfare in terms of an increase in aggregate employment and output if they successfully lobby for lower trade barriers set by the government.