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Factor market linkages in a global economy

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  • Oslington, Paul

Abstract

This paper considers linkages between national labour markets in a global economy, extending the existing analyses to the empirically important case where factor price equalization does not hold. Removing the assumption of factor price equalization allows the divergent wage experience as well as unemployment experience of Europe and America to be explained. Europe`s minimum wage forces it out of the labour intensive industry, leaving it specialised in the skill intensive industry, and with a lower return to skill than America. Under these conditions the entry of labour intensive NICs into world markets pushes down American wages and alters its economic structure (which were unchanged under factor price equalization), and reduces European unemployment (which increased under factor price equalization).

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 76 (2002)
Issue (Month): 1 (June)
Pages: 85-93

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Handle: RePEc:eee:ecolet:v:76:y:2002:i:1:p:85-93

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  1. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  2. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, vol. 42(9), pages 1613-1633, November.
  3. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
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Cited by:
  1. Hartmut Egger & Frode Meland, 2011. "Product and Labor Market Deregulation in Unionized Oligopoly with Asymmetric Countries," CESifo Working Paper Series 3611, CESifo Group Munich.
  2. Nathalie Chusseau & Joël Hellier, 2012. "Globalization and Inequality: Where do we stand?," Working Papers 279, ECINEQ, Society for the Study of Economic Inequality.
  3. Sebastian Braun, 2007. "Foreign Competition, Multinational Firms, and the Effects of One-Sided Wage Rigidity," JEPS Working Papers 07-003, JEPS.
  4. Alfred Sitz & Friedrich Sindermann, 2009. "Unemployment and International Trade: The Effects of Minimum Wages and Non-Traded Goods in Models representing Western Industrialized Countries and China (in German)," FIW Working Paper series 024, FIW.
  5. Kreickemeier, Udo & Nelson, Douglas, 2006. "Fair wages, unemployment and technological change in a global economy," Journal of International Economics, Elsevier, vol. 70(2), pages 451-469, December.
  6. Joël Hellier, 2012. "The North-South HOS Model, inequality and globalization," Working Papers 244, ECINEQ, Society for the Study of Economic Inequality.
  7. Joël Hellier, 2012. "North-South Globalization and Inequality," Working Papers 273, ECINEQ, Society for the Study of Economic Inequality.
  8. Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.

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