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The impact of intraindustry trade on the natural rate of unemployment in two simple models

  • Hian Hoon

This paper builds in two popular versions of the theory of equilibrium unemployment into a world economy engaged purely in intraindustry trade of differentiated products. We show that free trade through increasing the range of varieties available for consumption and expanding economies of scale leads to a lowering of the equilibrium rates of unemployment in all participating countries. Thus, we demonstrate channels through which international trade alleviates the problem of high unemployment in each country engaged in pure intraindustry trade. Copyright Kluwer Academic Publishers 1994

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File URL: http://hdl.handle.net/10.1007/BF01000743
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 5 (1994)
Issue (Month): 1 (March)
Pages: 29-46

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Handle: RePEc:kap:openec:v:5:y:1994:i:1:p:29-46
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  1. Kimball, Miles S, 1994. "Labor-Market Dynamics When Unemployment is a Worker Discipline Device," American Economic Review, American Economic Association, vol. 84(4), pages 1045-59, September.
  2. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  3. Brecher, Richard A., 1992. "An efficiency-wage model with explicit monitoring : Unemployment and welfare in an open economy," Journal of International Economics, Elsevier, vol. 32(1-2), pages 179-191, February.
  4. Hoon, Hian Teck, 1991. "Comparative advantage and the equilibrium rate of unemployment," Economics Letters, Elsevier, vol. 37(3), pages 299-304, November.
  5. Phelps, Edmund S., 1990. "Seven Schools of Macroeconomic Thought," OUP Catalogue, Oxford University Press, number 9780198283331, March.
  6. Hoon, Hian Teck & Phelps, Edmund S, 1992. "Macroeconomic Shocks in a Dynamized Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 82(4), pages 889-900, September.
  7. Copeland, Brian R., 1989. "Efficiency wages in a Ricardian model of international trade," Journal of International Economics, Elsevier, vol. 27(3-4), pages 221-244, November.
  8. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  9. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
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