Minimum Wage, Trade and Unemployment in General Equilibrium
Author | : Sugata Marjit |
Publisher | : |
Total Pages | : |
Release | : 2020 |
ISBN-10 | : OCLC:1179007403 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Minimum Wage, Trade and Unemployment in General Equilibrium written by Sugata Marjit and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The path breaking work of Card and Krueger (1993), showing higher minimum wage can increase employment turned the age-old conventional wisdom on its head. This paper demonstrates that this apparently paradoxical result is perfectly plausible in a competitive general equilibrium production structure of a small open economy with a non-traded good, without taking any recourse to monopsony, spatial heterogeneity, heterogeneity of consumers etc. the usual theoretical drivers behind the result. Following Jones and Marjit (1992) we build up a simple general equilibrium model with complementary relationship in production and we show that higher minimum wage can raise aggregate employment. Expansion in the non-traded sector following a wage hike may be consistent with the overall expansion of the export sector in a multi good framework, an unlikely outcome in a conventional two good models which cannot accommodate complementary relationship in production.