Impact of International Trade on Unemployment under Oligopoly

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: By studying a two-sector general equilibrium model in which firms engage in oligopolistic competition and unemployment is a result of the existence of efficiency wages, we derive the following results analytically. A country’s comparative advantage in producing manufactured goods increases with the level of efficiencies in the labor market. The opening of international trade leads to the equalization of wage rates even though countries differ in their factor endowments and labor market efficiencies. If countries have the same level of labor market efficiencies but differ in their endowments of labor and land, the opening to international trade leads to an increase in the wage rate in both countries.

Keywords: Unemployment; international trade; oligopoly; efficiency wages; increasing returns (search for similar items in EconPapers)
JEL-codes: E24 F12 J64 (search for similar items in EconPapers)
Date: 2017-09-13
New Economics Papers: this item is included in nep-int and nep-mac
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