EconPapers    
Economics at your fingertips  
 

TRADE-INDUCED REDUCTION IN UNEMPLOYMENT OF A HIGH-WAGE ECONOMY: A MINIMUM-WAGE MODEL WITH COUNTRY-SPECIFIC TECHNOLOGY

Richard Brecher and Zhihao Yu ()
Additional contact information
Zhihao Yu: Department of Economics, Carleton University, https://carleton.ca/economics/people/yu-zhihao/

No 21-04, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper shows that a high-wage country might reduce its unemployment by trading with a low-wage economy,despite popular predictions to the contrary. We demonstrate this possibility in a Heckscher-Ohlin-Samuelson type of model with two countries, which differ only because one of them has a binding minimum-wage constraint and a technological improvement that (despite the heightened wage) creates a comparative advantage in the labor-intensive good. Under these circumstances, the minimum-wage economy will experience an unemployment reduction when it trades with a low-wage counterpart. This theoretical result is consistent with some recent empirical estimates.

Keywords: Trade; Unemployment; Minimum wage; Country-specific technology (search for similar items in EconPapers)
JEL-codes: F16 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2021-05-14
New Economics Papers: this item is included in nep-cwa, nep-int and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published: Carleton Economics Papers

Downloads: (external link)
http://carleton.ca/economics/wp-content/uploads/cewp21-04.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:21-04

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Carleton Economic Papers from Carleton University, Department of Economics C870 Loeb Building, 1125 Colonel By Drive, Ottawa Ontario, K1S 5B6 Canada.
Bibliographic data for series maintained by Sabrina Robineau ( this e-mail address is bad, please contact ).

 
Page updated 2023-02-07
Handle: RePEc:car:carecp:21-04