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Effort, trade, and unemployment

Author

Listed:
  • Lutz Altenburg
  • Anke Brenken

Abstract

This paper incorporates equilibrium unemployment caused by efficiency wages into a monopolistic competition model of trade. Worker effort is treated as an endogenous variable that depends on the optimizing behaviour of firms and workers. Opening up trade induces firms to demand greater worker effort and to cut the size of their workforce. This counteracts the positive employment effect due to entry of firms. Circumstances are indicated in which the two effects just balance, leaving aggregate employment unchanged. Trade unambiguously increases worker effort, thereby enhancing within-firm productivity.

Suggested Citation

  • Lutz Altenburg & Anke Brenken, 2008. "Effort, trade, and unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 864-893, August.
  • Handle: RePEc:cje:issued:v:41:y:2008:i:3:p:864-893
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    References listed on IDEAS

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    1. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March.
    2. Swann, Peter & Temple, Paul & Shurmer, Mark, 1996. "Standards and Trade Performance: The UK Experience," Economic Journal, Royal Economic Society, vol. 106(438), pages 1297-1313, September.
    3. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-457, May.
    4. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    6. Mattias Ganslandt & James R. Markusen, 2001. "Standards and Related Regulations in International Trade: A Modeling Approach," NBER Working Papers 8346, National Bureau of Economic Research, Inc.
    7. Baldwin, Richard, 2000. "Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System," CEPR Discussion Papers 2574, C.E.P.R. Discussion Papers.
    8. Maskus, Keith E. & Wilson, John S. & Tsunehiro Otsuki, 2000. "Quantifying the impact of technical barriers to trade : a framework for analysis," Policy Research Working Paper Series 2512, The World Bank.
    9. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Cited by:

    1. Kamei, Keita, 2014. "International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly," MPRA Paper 59388, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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