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Fair wages, unemployment and technological change in a global economy

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  • Kreickemeier, Udo
  • Nelson, Douglas

Abstract

This chapter analyzes the effects of global and national technological change on employment and relative wages in an integrated two-country world (“Europe” and “America”), where both countries are characterized by equilibrium unemployment due to fair wage constraints. The asymmetry between the countries arises from country-specific preferences towards wage inequality, with Europe’s preferences being more egalitarian. Furthermore, we look at integration between this two-country world and a third country (“low wage sout”). We derive an analytical tool, the Virtual Integrated Equilibrium, that allows us to adapt Dixit and Norman’s Integrated Equilibrium approach to a situation where both countries have endogenous unemployment levels.
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Suggested Citation

  • Kreickemeier, Udo & Nelson, Douglas, 2006. "Fair wages, unemployment and technological change in a global economy," Journal of International Economics, Elsevier, vol. 70(2), pages 451-469, December.
  • Handle: RePEc:eee:inecon:v:70:y:2006:i:2:p:451-469
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    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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