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Market integration between developing countries and urban unemployment-the perspective of the real minimum wage

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  • Yao-Tung Chen

Abstract

This article examines the effect of market integration through free trade and factor mobility on the urban unemployment rate of a developing country whose economy is large enough to influence the terms of trade. From the perspective of the real minimum wage, it is shown that free trade would result in a rise or a decline in the country's urban unemployment rate, depending on its trade pattern. While the effect of labour mobility on a country's urban unemployment rate is determined by the difference between the ratio of would-be farmers to incoming workers and that of farm leavers to outgoing workers, the result of capital mobility will depend on a comparison of the initial urban unemployment rates of two countries.

Suggested Citation

  • Yao-Tung Chen, 2009. "Market integration between developing countries and urban unemployment-the perspective of the real minimum wage," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2431-2447.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:19:p:2431-2447
    DOI: 10.1080/00036840801964740
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