Comparative advantage and social protection Nicolas Boccard a , Tanguy van Ypersele b, * , Pierre Wunsch c a Departamento de Economia, Universitat de Girona, Campus de Montilivi, 17071 Girona, Spain b Economics Department, University of Namur and CORE-UCL, Rempart de la Vierge 8, 5000 Namur, Belgium c TRACTEBEL, Pantip Court Executive Residence 68, Soi Sathorn 1, South Sathorn Road, Bangkok 10120, Thailand Received 1 May 2000; received in revised form 1 November 2001; accepted 5 August 2002 Abstract This paper considers social protection, in the form of a minimum wage, in a global market. We show that trade, even without factor mobility, puts downward pressure on the level of the minimum wage determined by majority voting. This is due to the industrial specialization that results from the imposition of different minimum wages. We show that cooperation between governments to establish a common policy benefits the majority in each country but increases unemployment. D 2003 Elsevier Science B.V. All rights reserved. JEL classification: H23; H55; F15; J38 Keywords: Economic integration; Political economy; Social protection 1. Introduction The case for coordinating social policies in an integrated market has been on the European agenda for some years. The main argument for coordinating public policies is the ability to internalize market spillovers. Oates (1972) shows that a federal government should provide matching grants to help local government to internalize the spillovers due 0176-2680/03/$ - see front matter D 2003 Elsevier Science B.V. All rights reserved. doi:10.1016/S0176-2680(02)00169-6 * Corresponding author. Tel.: +32-8172-4846; fax: +32-8172-4840. E-mail address: tanguy@fundp.ac.be (T. van Ypersele). www.elsevier.com/locate/econbase European Journal of Political Economy Vol. 19 (2003) 247–264