Do Excessive Wage Increases Raise Imports? Theory and Evidence

Working Papers from Department of Economics, University of Glasgow

Abstract: This paper uses a model of trade in vertically differentiated products to examine the effects of "excessive wage" increases (i.e. above productivity) on the volume of commodity imports. The model predicts that for commodities, in which the country has comparative advantage in high quality varieties, an increase in "excessive wages" may result in a decrease in the volume of imports. The empirical validity of the model's predictions is demonstrated with the use of disaggregated Japanese import data for the period 1967-95. We also find that the aggregate volume of Japanese imports is not responsive to "excessive wage" changes.

JEL-codes: F4 F41 (search for similar items in EconPapers)
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Related works:
Working Paper: Do Excessive Wage Increases Raise Imports? Theory and Evidence (2001)
Working Paper: Do excessive wage increases raise imports? Theory and evidence (2004)
Journal Article: Do excessive wage increases raise imports?: Theory and evidence (2006)
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