Abstract
A three-goods model (importables, exportables, and nontradables) is used to analyze labor market adjustment to changes in the terms of trade and import tariffs for a small, open economy. First, a three-goods, four-factor model (labor, and capital specific to each sector) is developed and used to investigate how an exogenously generated change in a country's terms of trade affects labor allocation and wages in the short run. Next, a more traditional three-goods, two-factor model is used to examine the effects in the long run. The analysis is carried out under alternative assumptions regarding wage flexibility : full flexibility, economy-wide real wage rigidity, and sector-specific real wage rigidity.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call