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The impact of intraindustry trade on the natural rate of unemployment in two simple models

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  • Hian Hoon

Abstract

This paper builds in two popular versions of the theory of equilibrium unemployment into a world economy engaged purely in intraindustry trade of differentiated products. We show that free trade through increasing the range of varieties available for consumption and expanding economies of scale leads to a lowering of the equilibrium rates of unemployment in all participating countries. Thus, we demonstrate channels through which international trade alleviates the problem of high unemployment in each country engaged in pure intraindustry trade. Copyright Kluwer Academic Publishers 1994

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File URL: http://hdl.handle.net/10.1007/BF01000743
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 5 (1994)
Issue (Month): 1 (March)
Pages: 29-46

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Handle: RePEc:kap:openec:v:5:y:1994:i:1:p:29-46

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: intraindustry trade; scale economies; equilibrium unemployment; shirking behavior; labor turnover;

References

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  1. Hoon, Hian Teck & Phelps, Edmund S, 1992. "Macroeconomic Shocks in a Dynamized Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 82(4), pages 889-900, September.
  2. Miles S. Kimball, 1989. "Labor Market Dynamics When Unemployment Is A Worker Discipline Device," NBER Working Papers 2967, National Bureau of Economic Research, Inc.
  3. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  4. Brecher, Richard A., 1992. "An efficiency-wage model with explicit monitoring : Unemployment and welfare in an open economy," Journal of International Economics, Elsevier, vol. 32(1-2), pages 179-191, February.
  5. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  6. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  7. Hoon, Hian Teck, 1991. "Comparative advantage and the equilibrium rate of unemployment," Economics Letters, Elsevier, vol. 37(3), pages 299-304, November.
  8. Copeland, B.R., 1988. "Efficiency Wages In A Richardian Model Of International Trade," UBC Departmental Archives 88-31, UBC Department of Economics.
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