INTERNATIONAL WELFARE AND EMPLOYMENT LINKAGES ARISING FROM MINIMUM WAGES

Hartmut Egger (), Peter Egger and James Markusen

International Economic Review, 2012, vol. 53, issue 3, 771-790

Abstract: We formulate a two‐country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor market imperfections arise by virtue of country‐specific real minimum wages. Abstracting from selection of just the best firms into export status, standard effects on marginal and average firm productivity are reversed in our model, yet there are significant gains from trade arising from employment expansion. In addition, we show that with firm heterogeneity an increase in one country’s minimum wage triggers firm exit in both countries and thus harms workers at home and abroad.

Date: 2012
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https://doi.org/10.1111/j.1468-2354.2012.00700.x

Related works:
Working Paper: International Welfare and Employment Linkages Arising from Minimum Wages (2009)
Working Paper: International Welfare and Employment Linkages Arising from Minimum Wages (2009)
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