Foreign Competition, Multinational Firms, and the Effects of One-Sided Wage Rigidity
The paper studies the effects of a one-sided minimum wage in a two-country model of intra-industry trade, in which multinational firms arise endogenously. With positive levels of intra-industry trade the adverse employment and welfare effects of an asymmetric minimum wage are significantly larger than in a non-trading economy. Multinational firms generally mitigate the effect somewhat. Even though factor prices are not equalised across countries, a (binding) wage floor in one country will prop up wages in the other. The flexible wage country is insulated from shocks caused by factor accumulation in the rigid wage country, while an increase in the labour supply of the latter economy may have profound impacts on labour market outcomes in both countries.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brander, James & Krugman, Paul, 1983.
"A 'reciprocal dumping' model of international trade,"
Journal of International Economics,
Elsevier, vol. 15(3-4), pages 313-321, November.
- James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
- James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
- James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
- James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
- Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
- Oslington, Paul, 2002. "Factor market linkages in a global economy," Economics Letters, Elsevier, vol. 76(1), pages 85-93, June.
- Oslington, P., 2000. "Factor Market Linkages in a Global Economy," Economics Series Working Papers 9938, University of Oxford, Department of Economics.
- Paul Oslington, 2000. "Factor Market Linkages in a Global Economy," Economics Series Working Papers 38, University of Oxford, Department of Economics.
- Carl Davidson & Steven J. Matusz, 2004. "International Trade and Labor Markets: Theory, Evidence, and Policy Implications," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number itlm, June.
- Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
- James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
- 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.
- Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
- Kenneth F. Scheve & Matthew J. Slaughter, 2001. "Globalization and the Perceptions of American Workers," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 109, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:jep:wpaper:07003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Gall)
If references are entirely missing, you can add them using this form.