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Minimum Wages and Trade

For this project, I examine the effect of minimum wages on employment and trade in an open economy. Using methods developed in Bhaskar and To (1997), this will be based on the premise that labor markets are have inherent imperfections. They argue that these imperfections are more important that the product market imperfections that have become so important in the macroeconomics and trade literature. As was illustrated in Bhaskar and To, such labor market imperfections can lead to predictions that are counter to the conventional wisdom but match very well with the recent empirical evidence. Similarly, minimum wages may also have effects that are counter to the standard models in an open economy framework.




Ted To, and V. Bhaskar, "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," 1999, The Economic Journal, 109, 190–203.