Munich Personal RePEc Archive

Unemployment and Economic Integration for Developing Countries

Zhou, Haiwen (2017): Unemployment and Economic Integration for Developing Countries. Published in: Frontiers of Economics in China , Vol. 10, No. 4 (2015): pp. 664-690.

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Abstract

While financial or trade integration between countries may increase the size of the market and helps the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing sector. While financial or trade integration between developing countries leads manufacturing firms to adopt more advanced technologies, the level and rate of employment in the manufacturing sector will not deteriorate.

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