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Trade Liberalization in Oligopolistic Competition with Unemployment: A General Equilibrium Analysis

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  • Chi-Chur Chao
  • Eden S. H. Yu

Abstract

This paper examines the short- and long-run effects of partial trade liberalization through relaxation of quantity restrictions in an oligopolistically competitive economy with unemployment. While the short-run effects of the liberalization policy are ambiguous, its long-run impacts are clear: the policy dampens the price of the imported goods, raises firms' output, and reduces the number of firms. Furthermore, the policy lowers the unemployment ratio and hence improves welfare when the economy suffers from sector-specific unemployment, whereas the policy may aggravate underemployment and thus may lower welfare for a labor-surplus economy.

Suggested Citation

  • Chi-Chur Chao & Eden S. H. Yu, 1997. "Trade Liberalization in Oligopolistic Competition with Unemployment: A General Equilibrium Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 479-496, May.
  • Handle: RePEc:cje:issued:v:30:y:1997:i:2:p:479-96
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    Citations

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    Cited by:

    1. Haiwen Zhou, 2014. "International Trade with Increasing Returns in the Transportation Sector," Frontiers of Economics in China, Higher Education Press, vol. 9(4), pages 606-633, December.
    2. Marjit, Sugata & Kar, Saibal & Beladi, Hamid, 2007. "Protectionary bias in agriculture: A pure economic argument," Ecological Economics, Elsevier, vol. 63(1), pages 160-164, June.
    3. Haiwen Zhou, 2014. "Intermediate Inputs and External Economies," Frontiers of Economics in China, Higher Education Press, vol. 9(2), pages 216-239, June.
    4. Cassette, Aurélie & Fleury, Nicolas & Petit, Sylvain, 2012. "Income Inequalities and International Trade in Goods and Services: Short- and Long-Run Evidence," MPRA Paper 75205, University Library of Munich, Germany.
    5. Haiwen Zhou, 2013. "The Choice of Technology and Rural-Urban Migration in Economic Development," Frontiers of Economics in China, Higher Education Press, vol. 8(3), pages 337-361, September.
    6. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
    7. Sajid Anwar, 2010. "Wage Inequality, Increased Competition, and Trade Liberalization: Short Run vs Long Run," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 574-581, August.
    8. Anwar, Sajid, 2008. "Factor mobility, wage inequality and welfare," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 495-506, October.
    9. Choi, E. Kwan, 2007. "North-South trade and income inequality," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 347-356.
    10. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.
    11. Haiwen Zhou, 2015. "Unemployment and Economic Integration for Developing Countries," Frontiers of Economics in China, Higher Education Press, vol. 10(4), pages 664-690, December.
    12. Binglin Gong & Haiwen Zhou, 2014. "Financial development, the choice of technology, and comparative advantage," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(8), pages 1238-1261, December.
    13. Chao, Chi-Chur & Laffargue, Jean-Pierre & Sgro, Pasquale M., 2012. "Environmental control, wage inequality and national welfare in a tourism economy," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 201-207.
    14. Eckhard Janeba, 2009. "Exports, unemployment, and the welfare state," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 930-955, August.
    15. Pi Jiancai & Yin Jun, 2016. "Privatization, Unemployment, and Welfare in the Harris-Todaro Model with a Mixed Duopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-12, October.

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