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

Author

Listed:
  • Lei Wen

    (Shaanxi Normal University)

  • Haiwen Zhou

    (Old Dominion University)

Abstract

Impact of economic integration on unemployment is studied in a general equilibrium model in which unemployment is a result of the existence of efficiency wages. Banks provide capital to manufacturing firms and engage in oligopolistic competition. Manufacturing firms choose technologies and also engage in oligopolistic competition. A country with a more efficient financial sector has a lower unemployment rate and a comparative advantage in producing manufactured goods. Trade integration decreases the unemployment rate and increases the wage rate and the equilibrium level of technology. An additional financial integration will decrease the unemployment rate and increase the wage rate and the level of technology further.

Suggested Citation

  • Lei Wen & Haiwen Zhou, 2020. "Technology Choice, Financial Sector and Economic Integration Under the Presence of Efficiency Wages," Open Economies Review, Springer, vol. 31(1), pages 95-112, February.
    • Handle: RePEc:kap:openec:v:31:y:2020:i:1:d:10.1007_s11079-019-09533-x
    DOI: 10.1007/s11079-019-09533-x
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    More about this item

    Keywords

    Unemployment; Economic integration; Efficiency wages; Choice of technology; Two-tier oligopoly;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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