When trade hurts: Consumption indivisibilities and labor market distortions

• 成果类型: Article
• 署名作者: Krishna, K; Yavas, C
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2004.12.004
• 发表日期: 2005
• 页码: 413-427
• 关键词: labor market distortion; heterogeneous workers; demand complementarities; Non-homothetic preferences; losses from trade

摘要

We present a simple model where complementarities between wages and demand due to factor market distortions can make a transition economy worse off from trade. Prior to trade, a virtuous circle prevails: high wages in industry support a high demand for indivisible industrial goods, which in turn supports high wages. However, factor market distortions in the transition economy create a comparative disadvantage in industry. Opening up to trade results in the import of indivisibles and a fall in manufacturing wages, breaking this virtuous circle. Consequently, trade liberalization without structural reform can have serious adverse effects in a transition economy. (c) 2005 Elsevier B.V. All rights reserved.