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Do excessive wage increases raise imports? Theory and evidence

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  • Jim Malley

    (University of Glasgow)

  • Thomas Moutos

    (AUEB)

Abstract

This paper uses a model of trade in vertically differentiated products to examine the effects of “excessive wage” increases (i.e. above productivity) on the volume of commodity imports. The model predicts that for commodities, in which the country has comparative advantage in high quality varieties, an increase in “excessive wages” may result in a decrease in the volume of imports. The empirical validity of the model's predictions is demonstrated with the use of disaggregated Japanese import data for the period 1967-95. We also find that the aggregate volume of Japanese imports is not responsive to "excessive wage" changes.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0401003.

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Date of creation: 17 Jan 2004
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Handle: RePEc:wpa:wuwpma:0401003

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Keywords: wages; imports; vertically differentiated products;

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Citations

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Cited by:
  1. Margarita Katsimi & Sarantis Kalyvitis & Thomas Moutos, 2009. ""Unwarranted" Wage Changes and the Return on Capital," CESifo Working Paper Series 2804, CESifo Group Munich.
  2. Margarita Katsimi & Vassilis Sarantides, 2009. "The Impact of Fiscal Policy on Profits," CESifo Working Paper Series 2849, CESifo Group Munich.

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