ABSTRACT
This chapter discusses the possibility of international migration of labour into a trade union model of a small open economy with a flexible exchange rate. It presents the efficient bargains model of trade unions in the closed-economy case, the efficient bargains model to the open-economy case and the economy to international migration. Since the behaviour of the union is determined by the behaviour of insiders who are assumed to be able to know the migration outflow of the union members, the union will bargain for a real wage so that all of its remaining members will be employed. Trade unions theory is based on the idea that unions are concerned only with the welfare of their existing members and aim to maximise an objective function. An increase in the real exchange rate will also increase the home real product wage. However, the sign of change in the home real consumer wage is ambiguous.
