Do Excessive Wage Increases Raise Imports? Theory and Evidence

28 Pages Posted: 3 Jun 2001

See all articles by Jim Malley

Jim Malley

University of Glasgow - Department of Economics

Thomas Moutos

Athens University of Economics and Business - Department of International and European Economic Studies; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: April 2001

Abstract

This paper uses a model of trade in vertically differentiated products to examine the effects of "excessive wage" increases (i.e. above productivity) on the volume of commodity imports. The model predicts that for commodities, in which the country has comparative advantage in high quality varieties, an increase in "excessive wages" may result in a decrease in the volume of imports. The empirical validity of the model's predictions is demonstrated with the use of disaggregated Japanese import data for the period 1967-95. We also find that the aggregate volume of Japanese imports is not responsive to "excessive wage" changes.

JEL Classification: F4, F41

Suggested Citation

Malley, Jim and Moutos, Thomas, Do Excessive Wage Increases Raise Imports? Theory and Evidence (April 2001). Available at SSRN: https://ssrn.com/abstract=270948 or http://dx.doi.org/10.2139/ssrn.270948

Jim Malley (Contact Author)

University of Glasgow - Department of Economics ( email )

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+44 141 330 4940 (Fax)

HOME PAGE: http://www.gla.ac.uk/economics/malley/

Thomas Moutos

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

76 Patission Street
GR-10434 Athens
Greece

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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

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