International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly

Keita Kamei

MPRA Paper from University Library of Munich, Germany

Abstract: This paper incorporates the efficiency wage model of Shapiro and Stiglitz (1984) into a general oligopolistic equilibrium model of Neary (2009). We show that the pro-competitive effect stemming from trade liberalization increases the real wage of employees and relaxes the non-shirking condition. Therefore, the unemployment rate improves. Using numerical analysis, we show that, if firm productivity is sufficiently low, trade liberalization improves the utility of firm owners.

Keywords: Efficiency wages; Unemployment; International trade; General equilibrium with oligopoly (GOLE); Cournot competition (search for similar items in EconPapers)
JEL-codes: F66 J64 (search for similar items in EconPapers)
Date: 2014-01-05
New Economics Papers: this item is included in nep-int
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