International Trade and Domestic Distortions: Modelling the Transition Process
According to the standard view, when full competition prevails in product, labour, and capital markets, positive or negative external trade shocks may be accommodated by the migration of jobs between sectors; the negative impact on some households' income of lower nominal wages will be more than offset by lower prices of imported final goods. Unemployment, if any, will be temporary, unless labour market rigidities prevent the necessary adjustment. We argue that trade shocks trigger a process of creative destruction that necessarily causes distortions in the structure of productive capacity and hence market disequilibria. Therefore, the structural change that follows trade shocks can no longer be analysed within an equilibrium framework. The transition following a shock may be characterized by increasing imbalances, and create scope for policy intervention. The model presented in this paper, which focuses on the time dimension of production and market imbalances, allows clarifying the debate.
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- Francesco Saraceno, 2003.
"Wage Regimes, Accumulation and Finance Constraints: Keynesian Unemployment Revisited,"
- Francesco Saraceno, 2004. "Wage Regimes, Accumulation and Finance Constraints: Keynesian Unemployment Revisited," Documents de Travail de l'OFCE 2004-01, Observatoire Francais des Conjonctures Economiques (OFCE).
- Francesco Saraceno, 2004. "Wage Regimes, Accumulation and Finance Constraints : Keynesian Unemployment Revisited," Sciences Po publications 2004-01, Sciences Po.
- Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
- Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2001.
"Wage Flexibility and Unemployment: The Keynesian Perspective Revisited,"
Documents de Travail de l'OFCE
2001-02, Observatoire Francais des Conjonctures Economiques (OFCE).
- Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2004. "Wage Flexibility and Unemployment: The Keynesian Perspective Revisited," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 654-674, November.
- Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2001. "Wage Flexibility and Unemployment : the Keynesian Perspective Revisited," Sciences Po publications 2001-02, Sciences Po.
- Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804, March.
- Paul Krugman, 1996. "Domestic Distortions and the Deindustrialization Hypothesis," NBER Working Papers 5473, National Bureau of Economic Research, Inc.
- Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
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