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International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly

Kamei, Keita (2014): International Trade, Unemployment, and Firm Owners in a General Equilibrium with Oligopoly.

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Abstract

This paper incorporates the efficiency wage model of Shapiro and Stiglitz (1984) into a general oligopolistic equilibrium model of Neary (2009). We show that the pro-competitive effect stemming from trade liberalization increases the real wage of employees and relaxes the non-shirking condition. Therefore, the unemployment rate improves. Using numerical analysis, we show that, if firm productivity is sufficiently low, trade liberalization improves the utility of firm owners.

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