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Trade, Wages and Unemployment in the Presence of Hiring and Firing Costs

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  • Paul Oslington

Abstract

This paper offers a new explanation of the recent Australian wage inequality and unemployment experience. Building on a standard international trade model, it is argued that trade affects wage inequality and unemployment through changes in the bargaining power of different groups of workers in the presence of hiring and firing costs. This allows previously puzzling aspects of the trends to be explained, including the inconsistency of the existing Stolper‐Samuelson trade explanation with rising relative skilled wages at the same time as rising skilled labour intensity of production. Considering differences in labour market institutions, in particular hiring and firing costs and minimum wages, allows differences between the experiences of Australia, the USA and Europe to be explained.

Suggested Citation

  • Paul Oslington, 2002. "Trade, Wages and Unemployment in the Presence of Hiring and Firing Costs," The Economic Record, The Economic Society of Australia, vol. 78(241), pages 195-206, June.
    • Handle: RePEc:bla:ecorec:v:78:y:2002:i:241:p:195-206
    DOI: 10.1111/1475-4932.00023
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    Cited by:

    1. Benoit Freyens & Paul Oslington, 2007. "Dismissal Costs and Their Impact on Employment: Evidence from Australian Small and Medium Enterprises," The Economic Record, The Economic Society of Australia, vol. 83(260), pages 1-15, March.
    2. Paul Oslington & Benoit Pierre Freyens, 2013. "A First Look at Incidence and Outcomes of Unfair Dismissal Claims under Fair Work, WorkChoices and the Workplace Relations Act," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(2), pages 295-306.
    3. Jürgen Meckl, 2006. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade: Comment," American Economic Review, American Economic Association, vol. 96(5), pages 1924-1930, December.
    4. Paul Oslington, 2005. "Unemployment and Trade Liberalisation," The World Economy, Wiley Blackwell, vol. 28(8), pages 1139-1155, August.

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