|
|
|
|
Title: |
Wage Indexation, Urban Unemployment and
Customs Unions |
| Author: |
Chao, Chi-Chur |
| Author
Affiliation: |
OR State U |
| Source: |
International Economic Journal, Summer 1991, v. 5, no. 2, pp. 1-15 |
|
Publication Date: |
Summer 1991 |
|
Abstract: |
This paper examines the welfare effects of
trade creation and trade diversion for an immobile capital Harris-Todaro
economy. The traditional assumption of a rigid urban wage in the
Harris-Todaro model is dropped and a formulation of a wage indexation
mechanism makes the urban wage rate endogenous. It is shown that the
welfare consequences of trade creation and trade diversion hinge upon
the urban wage responses to the formation of various types of customs
unions. Additionally, the welfare effects of customs unions are
considered for the Lewis labor-surplus economy allowing for urban
unemployment. |
|
