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Factor Market Linkages in a Global Economy

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Author Info
Paul Oslington

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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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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 038.

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Date of creation: 2000
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Handle: RePEc:oxf:wpaper:038

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Related research
Keywords: integrated equilibrium factor price equalization inequality unemployment

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution

References listed on IDEAS
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  1. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, vol. 42(9), pages 1613-1633, November. [Downloadable!] (restricted)
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  2. Donald R. Davis & Trevor A. Reeve, 1997. "Human Capital, Unemployment and Relative Wages in a Global Economy," Harvard Institute of Economic Research Working Papers 1804, Harvard - Institute of Economic Research. [Downloadable!]
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  3. Donald R. Davis, 1996. "Does European Unemployment Prop Up American Wages?," Harvard Institute of Economic Research Working Papers 1752, Harvard - Institute of Economic Research.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Anthony B Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  2. Sebastian Braun, 2007. "Foreign Competition, Multinational Firms, and the Effects of One-Sided Wage Rigidity," JEPS Working Papers 07-003, JEPS. [Downloadable!]
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