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标题：Wage Subsidy and Sector-Specific Unemployment: A New Economic Geography Approach
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作者：Yenhuang Chen ; Lihong Zhao
期刊名称：Economics Bulletin
电子版ISSN：1545-2921
出版年度：2009
卷号：29
期号：1
页码：426-436
出版社：Economics Bulletin
摘要：This paper uses a new economic geography approach to examine the effects of wage subsidy, which is undertake to bolster up the industrial development. This paper also highlights the effects of trade liberalization and international capital mobility. In particular, sector-specific unemployment is introduced in the monopolistically competitive sector of the home country. Citation:Yenhuang Chen and Lihong Zhao, (2009) ''Wage Subsidy and Sector-Specific Unemployment: A New Economic Geography Approach'', Economics Bulletin, Vol. 29 no.1 pp. 426-436.Submitted:.Jun.11.2008....Published:March 25, 2009..... var currentpos,timer; function initialize() { timer=setInterval("scrollwindow()",10);} function sc(){clearInterval(timer); }function scrollwindow() { currentpos=document.body.scrollTop; window.scroll(0,++currentpos); if (currentpos != document.body.scrollTop) sc();} document.onmousedown=scdocument.ondblclick=initialize11. Introduction Many empirical surveys reveal that a large share of international trade has taken place between similar countries.1Actually, there is evidence that intra-industry trade occurs not only in industrial countries but also in developing countries.2There has been a proliferation of studies in the field of international trade under the context of inter-industry trade, but intra-industry trade has received less attention until recent decades. Comparative advantage, based on which the inter-industry trade emerges, is not powerful enough to explain the trade between similar countries. It is the concept of economies of scale that is used to explain this sort of trade. Monopolistic competition à la Dixit and Stiglitz (1977) incorporates important features, such as product variety, consumer preference and market entry. Economists extensively employ the monopolistically competitive approach to establish an intra-industry trade model. Krugman's (1980) model of intra-industry trade integrates production differentiation, economies of scale and imperfect competition. Now, this model has developed into the theory of "New Economic Geography" (hereafter NEG) to analyze industrial location. NEG mainly investigates the endogenous emergence of industrial agglomeration by incorporating monopolistic competition, economies of scale and iceberg transport costs. Krugman (1991) proves that firms and workers tend to agglomerate together, primarily because of the impact of increasing returns and transport costs upon labor migration. Involving two vertically linked industries, both of which are imperfectly competitive, Venables (1996) shows that linkages between upstream and downstream can be equally effective with labor migration in endogenously determining equilibrium locations. On the basis of a similar method, Krugman and Venables (1995) address the relationship among globalization, agglomeration and international inequalities, while Forslid and Midelfart (2005) explore industrial policy implications. These papers rely on the sharp assumption that labor is the single primary factor for production. Aiming to explore the crucial role of capital on trade liberalization, this paper develops a more general framework, where both capital and labor serve as primary factors for production.3Ever since the influential papers by Krugman (1980 and 1991), NEG has attracted a great deal of attention in the literature, which is evidenced by the launch of the Journal of Economic Geography in 2001. Currently, applications of the theory of NEG have been popularized to the fields of international trade, regional economics, economic growth, and/or economic integration. In the real world, because of the uneven development between the urban and the rural, the phenomenon of unemployment is inevitable. On the other hand, due to some politically related reasons or the bargaining power of unions, the minimum wage is widely witnessed in the urban areas of many countries. Harris and Todaro (1970) analyze the formation of urban unemployment which is caused by institutionally fixed 1See, for example, Greenaway and Milner (1986), Helpman (1987) and Krugman and Obstfeld (2003). 2See, for example, Tharakan (1984). 3The large bulk of one-country general-equilibrium models utilize both capital and labor as primary factors for production. However, the introduction of capital into NEG model is still relatively scarce.