Unemployment and Economic Integration for Developing Countries

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.

Impact of international trade on unemployment under oligopoly

“…With the opening to international trade, the degree of competition in the market for manufactured goods increases. Third, for models of unemployment under oligopoly, Zhou (2015a) Zhou (2015b) and this paper is that the wage rate is exogenously given in Zhou (2015b) while it is endogenously determined in this paper.…”

Technology Choice, Financial Sector and Economic Integration Under the Presence of Efficiency Wages

“…Zhou (2015) visits financial and trade integration for developing countries. The wage rate is exogenous given in Zhou (2015) while it is endogenously determined in this paper. Zhou (2018) addresses the impact of international trade on unemployment in which unemployment is a result of the existence of efficiency wages.…”