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Wage Subsidy and Sector-Specific Unemployment: A New Economic Geography Approach

  • Yenhuang Chen


    (Chinese Culture University)

  • Lihong Zhao


    (China HuanQiu Contracting & Engineering Corporation)

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    This paper uses a new economic geography approach to examine the effects of wage subsidy, which is undertake to bolster up the industrial development. This paper also highlights the effects of trade liberalization and international capital mobility. In particular, sector-specific unemployment is introduced in the monopolistically competitive sector of the home country.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 29 (2009)
    Issue (Month): 1 ()
    Pages: 426-436

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    Handle: RePEc:ebl:ecbull:eb-08f20004
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    1. Neary, Peter, 1988. "Stability of the Mobile-Capital Harris-Todaro Model: Some Further Results," Economica, London School of Economics and Political Science, vol. 55(217), pages 123-27, February.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    3. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    5. Venables, Anthony J, 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
    6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    7. Tharakan, P. K. M., 1984. "Intra-industry trade between the industrial countries and the developing world," European Economic Review, Elsevier, vol. 26(1-2), pages 213-227.
    8. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
    9. Neary, J Peter, 1981. "On the Harris-Todaro Model with Intersectoral Capital Mobility," Economica, London School of Economics and Political Science, vol. 48(191), pages 219-34, August.
    10. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    11. Forslid, Rikard & Midelfart, Karen Helene, 2005. "Internationalisation, industrial policy and clusters," Journal of International Economics, Elsevier, vol. 66(1), pages 197-213, May.
    12. R. D. Husby, 1993. "The Minimum Wage, Wage Subsidies, And Poverty," Contemporary Economic Policy, Western Economic Association International, vol. 11(3), pages 30-38, 07.
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