Essays in strategic trade and competitiveness
Abstract
This research explores the rent seeking activities of firms, labor and governments and their effect on export market share, import penetration and welfare in the domestic economy. The second chapter examines the effect of union rent seeking activity on the strategic R&D investment behavior of exporting firms and government policy. In our model, a higher level of R&D investment leads to a larger export market share. Unions however recognize R&D investment by firms as a potential source of rents. The firms take cognizance of this fact while making strategic R&D investment decisions. Hence, unionized firms make a lower level of investment in R&D even when there as strategic gains from R&D, as compared to the Spencer and Brander (1983) benchmark case of the non unionized firm. Consequently, they have a lower export market share as compared to the non-unionized firm. The government also has to subsidize R&D at a higher level in a unionized labor market because of union rent seeking. This is useful in determining whether to subsidize private R&D or to conduct federal R&D and transfer the technology. We also demonstrate that a pro-labor government will subsidize R&D at a higher rate as compared to a pro-capital government. The third chapter is an empirical test of the conclusions in the second chapter. It investigates the causality between union activity, an industry's R&D investment decisions and its export market share, using data from the U.S. manufacturing sector for the years 1975 to 1984.$\sp1$ We test the hypothesis that the proportion unionized and the union wage differential have a negative effect on R&D investment, industries that are more unionized respond less favorably to a positive change in exogenous factors that increase the productivity of R&D and that while R&D has a positive effect on exports, this effect is lower in highly unionized industries. The empirical results support our hypothesis. Union rent seeking through its negative effect on R&D investment decisions has lowered the export market share of unionized industries in the U.S. ftn $\sp1$The year 1982 has been excluded since certain data were not available.
Degree
Ph.D.
Advisors
Thursby, Purdue University.
Subject Area
Labor economics|Business costs|Labor relations
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