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Tariffs, Efficiency Wages and Unemployment

Author

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  • Rajit Biswas

    (Centre for Development Studies)

  • Kumar Shubham

    (Centre for Development Studies)

Abstract

The present model embeds a model of intra-industry trade into a labour market, which is characterised by efficiency wages. It is shown that tariff protection of the import competing, home produced brands, may cause the equilibrium unemployment rate to shoot up and instead of protecting the sector may cause it to contract. This is possible when elasticity of demand is high and firms have less market power and thus, protectionist effect of tariffs may get completely reversed.

Suggested Citation

  • Rajit Biswas & Kumar Shubham, 2018. "Tariffs, Efficiency Wages and Unemployment," Journal of Industry, Competition and Trade, Springer, vol. 18(4), pages 503-511, December.
    • Handle: RePEc:kap:jincot:v:18:y:2018:i:4:d:10.1007_s10842-018-0270-y
    DOI: 10.1007/s10842-018-0270-y
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    References listed on IDEAS

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    Cited by:

    1. Rajit Biswas & Vandana Thandassery Ramakrishnan, 2022. "Taxes and unemployment," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(2), pages 182-194, June.

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    More about this item

    Keywords

    Scale economies; Monopolistic competition; Efficiency wages; Unemployment;
    All these keywords.

    JEL classification:

    • F - International Economics
    • E - Macroeconomics and Monetary Economics

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