A Simple Theory of Trade and Unemployment in General Equilibrium
Ian King () and
Frank Stähler ()
No 1116, Department of Economics - Working Papers Series from The University of Melbourne
We develop an open economy general equilibrium model, with auction-based directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by endowment, trade makes both the unemployment rate and the rental in the capital-(labor-) abundant country rise (decline), but does not lead to equalization. Furthermore, the expected wage is higher in the capital-abundant country. If countries differ by technology, trade increases (decreases) the unemployment rate in the country whose technology is relatively superior (inferior) for producing the capital-intensive good.
Keywords: Unemployment; international trade; general equilibrium (search for similar items in EconPapers)
JEL-codes: F16 J64 (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1116
Access Statistics for this paper
More papers in Department of Economics - Working Papers Series from The University of Melbourne Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia. Contact information at EDIRC.
Series data maintained by Muntasha Meemnun Khan ().