ISBN: 3540411615
TITLE: Unemployment in Open Economics
AUTHOR: P. Wei
TOC:

1 Introduction 1
2 Stylised Facts 9
2.1 Matching on the Labour Market and Unemployment 9
2.2 Trade and the Terms of Trade 15
3 A Two-Sector Search Model of an Open Economy without Capital 19
3.1 The Reference Model of Risk-Neutral Individuals 22
3.1.1 Individuals and the Labour Market 22
3.1.2 The Firm's Maximisation Problem 27
3.1.3 Individual Wage Negotiations 31
3.2 International Trade and Exchange Rate Shocks in the Medium Run 36
3.2.1 The Description of the Economy in the Medium Run 37
3.2.2 The Effects of Intensified International Trade 41
3.2.3 The Effects of Changes in the Exchange Rate 47
3.3 The Evolution to the New Equilibrium - The Adjustment Process 53
3.3.1 Various Shocks and Adjustment Processes 53
3.3.2 The Transition Period 2: How to Reach the New Steady State 56
3.3.3 The Transition Period 1: The Behaviour of the Economy Right after the Shock 60
3.4 The Economy with Risk-Neutral Individuals and Individual Bargaining 69
3.5 Appendix A 75
3.5.1 The Individual's Value Functions 75
3.5.2 The Wage Agreement between Risk-Neutral Individuals and Firms 77
3.5.3 A Terms-of-Trade Shock and Unemployment 77
3.5.4 Exchange Rate Changes and Unemployment 79
3.5.5 The Existence or Nonexistence of the Second Transition Period 80
4 The Generalised Model: An Open Economy with Risk-Averse Individuals 83
4.1 Individual Bargaining with Risk-Averse Individuals 85
4.2 The Effects of a Terms-of-Trade Shock on an Economy with Risk-Averse Individuals 93
4.2.1 The Equilibrium of an Economy with Risk-Averse Individuals 95
4.2.2 The Effects of a Terms-of-Trade Shock - A Comparative Static Analysis 103
4.2.3 The Dynamic Behaviour of the Economy 106
4.3 The Economy with Risk-Averse Individuals and Individual Bargaining 110
4.4 Appendix B 116
4.4.1 The Wage Agreement between Risk-Averse Individuals and Risk-Neutral Firms 116
4.4.2 Terms-of-Trade Shocks and Risk Aversion 117
5 An Open Economy with Industry-Level Bargaining 121
5.1 Trade Unions in Economic Models 123
5.2 Wages under Collective Bargaining 126
5.3 Trade Unions in an Open Economy 133
5.3.1 The Equilibrium in an Economy with Industry-Level Wage Negotiations 134
5.3.2 The Effects of a Terms-of-Trade Shock in Economies with Collective Bargaining 137
5.3.3 The Effects of Exchange Rate Variations in Presence of Industry-Level Bargaining 141
5.3.4 Properties of the Adjustment Path 143
5.4 The Economy with Risk-Neutral Individuals and Collective Bargaining 146
5.5 An Illustrative Numerical Example of Risk Neutrality, Risk Aversion, and Collective Bargaining 150
5.6 Appendix C 155
5.6.1 A Wage Agreement between a Union and an Employer's Association 155
5.6.2 Terms-of-Trade Shocks and Industry-Level Bargaining 156
5.6.3 Exchange Rate Shocks and Collective Wage Negotiations 158
6 A Simple Matching Model of a One-Sector Economy with Capital Accumulation 161
6.1 The Individual's and Firm's Decision Problem 163
6.1.1 Individuals and the Asset Accumulation 165
6.1.2 Firm's Profit Maximisation with Capital and Investments 169
6.1.3 The Wage Setting between a Trade Union and an Employers' Association 173
6.2 The Equilibrium with Capital Accumulation - The Long-Run Perspective 179
6.2.1 The Equilibrium of an Economy in Presence of Uncertainty 179
6.2.2 The Capital Market in Presence of Uncertainty and a Borrowing Restriction 184
6.3 Appendix D: The Wage Agreement 189
7 Summary 191
List of Symbols 203
List of Figures 207
List of Tables 209
Bibliography 211
Author Index 221
Subject Index 223
END
