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Trade, Wages and Unemployment in the Presence of Hiring and Firing Costs

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Oslington, Paul

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Abstract

This paper offers a new explanation of the recent Australian wage inequality and unemployment experience. Building on a standard international trade model, it is argued that trade affects wage inequality and unemployment through changes in the bargaining power of different groups of workers in the presence of hiring and firing costs. This allows previously puzzling aspects of the trends to be explained, including the inconsistency of the existing Stolper-Samuelson trade explanation with rising relative skilled wages at the same time as rising skilled labour intensity of production. Considering differences in labour market institutions, in particular hiring and firing costs and minimum wages, allows differences between the experiences of Australia, the USA and Europe to be explained. Copyright 2002 by The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 78 (2002)
Issue (Month): 241 (June)
Pages: 195-206
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Handle: RePEc:bla:ecorec:v:78:y:2002:i:241:p:195-206

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  1. Oslington, Paul & Freyens, Ben, 2005. "Dismissal Costs and their Impact on Employment: Evidence from Australian Small and Medium Enterprises," MPRA Paper 961, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-11-28.

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