The Impact of Intra-Industry Trade on the Natural Rate of Unemployment in Two Simple Models
This paper builds in two popular versions of the theory of equilibrium unemployment into a world economy engaged purely in intraindustry trade of differentiated products. We show that free trade through increasing the range of varieties available for consumption and expanding economies of scale leads to a lowering of the equilibrium rates of unemployment in all participating countries. Thus, we demonstrate channels through which international trade alleviates the problem of high unemployment in each country engaged in pure intraindustry trade.
Open Economies Review
HOON, Hian Teck.
The Impact of Intra-Industry Trade on the Natural Rate of Unemployment in Two Simple Models. (2003). Open Economies Review. 5, (1), 348-352. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/392