Globalisation, Wages and Unemployment: An Economic Geography Perspective

31 Pages Posted: 5 Apr 2001

See all articles by Harry Garretsen

Harry Garretsen

Utrecht University - School of Economics; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Jolanda Peeters

Radboud University Nijmegen - Department of Economics

Date Written: February 2000

Abstract

This paper is about the impact of globalisation on (low-skilled) labour. We build a new economic geography model in which two types of labour (low and high-skilled) are distinguished and in which, due to wage rigidities, unemployment may arise. We also introduce two types of transportation costs (for goods and services) to allow for a more intricate analysis of the effect of globalisation. A first conclusion is that the impact on wages and unemployment depends critically on the level and type of the transportation costs that is being reduced, the distribution of low and high skilled labour and notably also on the degree of wage flexibility. Globalisation is by no means always bad news for the low-skilled. On the contrary, in some of the simulations that we performed, the low-skilled are better off in terms of their relative wage or the unemployment outcome as globalisation progresses. A final conclusion is that it matters a great deal for the effects of globalisation whether or not wages are rigid.

JEL Classification: F1

Suggested Citation

Garretsen, Harry and Peeters, Jolanda, Globalisation, Wages and Unemployment: An Economic Geography Perspective (February 2000). Available at SSRN: https://ssrn.com/abstract=263953

Harry Garretsen (Contact Author)

Utrecht University - School of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

HOME PAGE: http://www.cesifo.de

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands
+31 24 361 5889 (Phone)
+31 24 361 1846 (Fax)

Jolanda Peeters

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands

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