Unemployment and Economic Integration for Developing Countries

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: While financial or trade integration between countries may increase the size of the market and helps the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing sector. While financial or trade integration between developing countries leads manufacturing firms to adopt more advanced technologies, the level and rate of employment in the manufacturing sector will not deteriorate.

Keywords: Unemployment; economic development; financial integration; international trade; choice of technology (search for similar items in EconPapers)
JEL-codes: D43 F12 O10 (search for similar items in EconPapers)
Date: 2017-12-15
New Economics Papers: this item is included in nep-int and nep-lab
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Published in Frontiers of Economics in China 4.10(2015): pp. 664-690

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Related works:
Journal Article: Unemployment and Economic Integration for Developing Countries (2015)
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