Abstract
The consequences of minimum wages on output and employment in open economies have been the subject of several studies while the consequences of inflexible wage structures have attracted much less attention although such rigidities can also be observed. This paper aims at analysing the output and employment effects of a rigid ratio between the wages for skilled and unskilled labour when capital is intersectorally mobile. It will be shown that an exogenous disturbance of a full employment equilibrium, due to a change in commodity prices or factor endowments, can be expected to cause unemployment of one group of labour and may also cause a switch from incomplete to complete specialisation.
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