Wage Fairness and International Trade Theory and Policy
1991 (English)Report (Other academic)
We show how an extended theory of fair wages, in which workers also care about the functional distribution of income, can be incorporated in the two-by-two Heckscher-Ohlin model. An important feature of the model is the existence of involuntary unemployment. Several results stand out. First, there is no longer a simple relation between measures of factor abundance and trade patterns. First, there is no longer a simple relation between measures of factor abundance and trade patterns. Second, factor-price equalization will generally not occur. Third, differences in social norms explain why terms of trade shocks produce nonuniform adjustments in real wages and unemployment across otherwise similar countries. Fourth, losses from trade may occur. Finally, in countries where fairness considerations are important, tariffs may increase overall employment.
Place, publisher, year, edition, pages
Stockholm: IIES , 1991. , 29 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 486
international trade, fair wages, involuntary unemployment
IdentifiersURN: urn:nbn:se:su:diva-41792OAI: oai:DiVA.org:su-41792DiVA: diva2:337758