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Labor market adjustments to globalization: unemployment versus relative wages

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  • Eckel, Carsten

Abstract

The aim of this paper is two-fold. First, we analyze the role of wage rigidities in labor market adjustments to international trade and biased technological progress in a small open economy. We introduce efficiency wages into a neoclassical trade model and show that changes in relative wages are independent of wage rigidities. Second, we examine the impact of capital market integration on relative wages and unemployment and find that wage inequality will rise (fall) and unemployment will fall (rise) when capital is being imported (exported).

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Bibliographic Info

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 14 (2003)
Issue (Month): 2 (August)
Pages: 173-188

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Handle: RePEc:eee:ecofin:v:14:y:2003:i:2:p:173-188

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Web page: http://www.elsevier.com/locate/inca/620163

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References

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  2. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
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  22. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  23. Xu, Bin, 2001. "Factor bias, sector bias, and the effects of technical progress on relative factor prices," Journal of International Economics, Elsevier, vol. 54(1), pages 5-25, June.
  24. Khalid Sekkat & Mathias Dewatripont & André Sapir, 1999. "Labor market effects of trade with LDC's in Europe," ULB Institutional Repository 2013/7378, ULB -- Universite Libre de Bruxelles.
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Citations

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Cited by:
  1. Almas Heshmati, 2010. "The Relationship between Income Inequality, Poverty, and Globalization," Working Papers id:3237, eSocialSciences.
  2. Beladi, Hamid & Chao, Chi-Chur & Hollas, Daniel, 2013. "How growing asset inequality affects developing economies," Journal of Economics and Business, Elsevier, vol. 68(C), pages 43-51.
  3. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
  4. Heshmati, Almas, 2003. "Measurement of a Multidimentional Index of Globalization and its Impact on Income Inequality," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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