Impact of International Trade under Dual Labor Markets

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: A country’s unemployment rate can be affected by technology choice and the opening of international trade. This general equilibrium model examines the impact of international trade with the presence of dual labor markets in which manufacturing firms engage in oligopolistic competition and choose technologies with different marginal and fixed costs to maximize profits. In a closed economy, it is shown that an increase in labor market efficiency or a population increase induces manufacturing firms to adopt more advanced technologies and the wage rate in the manufacturing sector increases. With the existence of a continuum of technologies, technology choice is not a source of firm heterogeneity. The opening of international trade leads to an increase in the wage rate in the manufacturing sector and the price of the agricultural good. When countries are identical, international trade always increases national welfare.

Keywords: International trade; dual labor markets; oligopoly; technology choice; increasing returns (search for similar items in EconPapers)
JEL-codes: E24 F12 F16 F66 J64 (search for similar items in EconPapers)
Date: 2023-01-29
New Economics Papers: this item is included in nep-int and nep-lab
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Journal Article: Impact of international trade under dual labor markets (2023)
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