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Labor market adjustments to globalization: Unemployment versus relative wages

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  • Eckel, Carsten

Abstract

The aim of this paper is two-fold. First, we analyze the role of wage rigidities in labor market adjustments to international trade and biased technological progress in a small open economy. We introduce efficiency wages into a neoclassical trade model and show that changes in relative wages are independent of wage rigidities. Second, we examine the impact of capital market integration on relative wages and unemployment and find that wage inequality will rise (fall) and unemployment will fall (rise) when capital is being imported (exported).

Suggested Citation

  • Eckel, Carsten, 2003. "Labor market adjustments to globalization: Unemployment versus relative wages," Munich Reprints in Economics 20538, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:20538
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    Cited by:

    1. Heshmati, Almas, 2004. "The Relationship between Income Inequality, Poverty and Globalisation," IZA Discussion Papers 1277, IZA Network @ LISER.
    2. 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.
    3. Beladi, Hamid & Chao, Chi-Chur & Hollas, Daniel, 2013. "How growing asset inequality affects developing economies," Journal of Economics and Business, Elsevier, vol. 68(C), pages 43-51.
    4. Mei-Yin Lin & Jue-Shyan Wang, 2008. "Capital outflow and unemployment: evidence from panel data," Applied Economics Letters, Taylor & Francis Journals, vol. 15(14), pages 1135-1139.
    5. Hamid Beladi & Chen Cheng & May Hu & Yuan Yuan, 2020. "Unemployment governance, labour cost and earnings management: Evidence from China," The World Economy, Wiley Blackwell, vol. 43(10), pages 2526-2548, October.
    6. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
    7. Almas Heshmati, 2003. "Measurement of a Multidimentional Index of Globalization and its Impact on Income Inequality," WIDER Working Paper Series DP2003-69, World Institute for Development Economic Research (UNU-WIDER).
    8. Burcak Polat, 2016. "Capital Outflows and Unemployment: A Panel Analysis of OECD Countries," Applied Economics and Finance, Redfame publishing, vol. 3(4), pages 73-77, November.

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