To integrate with a high- or low-wage country: That is the question

E. Kwan Choi

doi:10.1016/j.iref.2011.02.003

To integrate with a high- or low-wage country: That is the question

E. Kwan Choi

City University of Hong Kong

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

1 Citation (Scopus)

Abstract

This paper considers the question of whether a country with the intermediate capital-labor ratio is better off forming a free trade area with the higher or lower wage country. Typical analyses of gains from trade ignore the effects of free trade on factor prices. When Europe forms a free trade area with a high-wage economy, the equalized wage rises and rent declines, while the price of the importable declines. Workers unambiguously benefit, but integration has an ambiguous effect on capitalists. However, consumers as a whole benefit from the integration and workers can more than offset the losses of the capitalists. On the other hand, Europe's integration with a low-wage economy raises rent but lowers the wage and the price of the labor-intensive good. Accordingly, capitalists unambiguously benefit, but integration has an ambiguous effect on workers. Again, welfare of all consumers rises and the capitalists can more than offset the losses of workers. © 2011 Elsevier Inc.

Original language	English
Pages (from-to)	792-799
Journal	International Review of Economics and Finance
Volume	20
Issue number	4
DOIs	https://doi.org/10.1016/j.iref.2011.02.003
Publication status	Published - Oct 2011

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 1 No Poverty
SDG 10 Reduced Inequalities

Research Keywords

High-wage
Income distribution
Integrate

Access Output

10.1016/j.iref.2011.02.003

Other Access Options

Check CityUHK Library

Permanent Link

Right click to copy link

Cite this

@article{04d1a571a7cd41e4bcdb9424f8793fef,

title = "To integrate with a high- or low-wage country: That is the question",

abstract = "This paper considers the question of whether a country with the intermediate capital-labor ratio is better off forming a free trade area with the higher or lower wage country. Typical analyses of gains from trade ignore the effects of free trade on factor prices. When Europe forms a free trade area with a high-wage economy, the equalized wage rises and rent declines, while the price of the importable declines. Workers unambiguously benefit, but integration has an ambiguous effect on capitalists. However, consumers as a whole benefit from the integration and workers can more than offset the losses of the capitalists. On the other hand, Europe's integration with a low-wage economy raises rent but lowers the wage and the price of the labor-intensive good. Accordingly, capitalists unambiguously benefit, but integration has an ambiguous effect on workers. Again, welfare of all consumers rises and the capitalists can more than offset the losses of workers. {\textcopyright} 2011 Elsevier Inc.",

keywords = "High-wage, Income distribution, Integrate",

author = "Choi, \{E. Kwan\}",

note = "Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].",

year = "2011",

month = oct,

doi = "10.1016/j.iref.2011.02.003",

language = "English",

volume = "20",

pages = "792--799",

journal = "International Review of Economics and Finance",

issn = "1059-0560",

publisher = "Elsevier Inc.",

number = "4",

}

TY - JOUR

T1 - To integrate with a high- or low-wage country

T2 - That is the question

AU - Choi, E. Kwan

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 2011/10

Y1 - 2011/10

N2 - This paper considers the question of whether a country with the intermediate capital-labor ratio is better off forming a free trade area with the higher or lower wage country. Typical analyses of gains from trade ignore the effects of free trade on factor prices. When Europe forms a free trade area with a high-wage economy, the equalized wage rises and rent declines, while the price of the importable declines. Workers unambiguously benefit, but integration has an ambiguous effect on capitalists. However, consumers as a whole benefit from the integration and workers can more than offset the losses of the capitalists. On the other hand, Europe's integration with a low-wage economy raises rent but lowers the wage and the price of the labor-intensive good. Accordingly, capitalists unambiguously benefit, but integration has an ambiguous effect on workers. Again, welfare of all consumers rises and the capitalists can more than offset the losses of workers. © 2011 Elsevier Inc.

AB - This paper considers the question of whether a country with the intermediate capital-labor ratio is better off forming a free trade area with the higher or lower wage country. Typical analyses of gains from trade ignore the effects of free trade on factor prices. When Europe forms a free trade area with a high-wage economy, the equalized wage rises and rent declines, while the price of the importable declines. Workers unambiguously benefit, but integration has an ambiguous effect on capitalists. However, consumers as a whole benefit from the integration and workers can more than offset the losses of the capitalists. On the other hand, Europe's integration with a low-wage economy raises rent but lowers the wage and the price of the labor-intensive good. Accordingly, capitalists unambiguously benefit, but integration has an ambiguous effect on workers. Again, welfare of all consumers rises and the capitalists can more than offset the losses of workers. © 2011 Elsevier Inc.

KW - High-wage

KW - Income distribution

KW - Integrate

UR - https://www.scopus.com/pages/publications/79957544625

UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-79957544625&origin=recordpage

U2 - 10.1016/j.iref.2011.02.003

DO - 10.1016/j.iref.2011.02.003

M3 - RGC 21 - Publication in refereed journal

SN - 1059-0560

VL - 20

SP - 792

EP - 799

JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

IS - 4

ER -

To integrate with a high- or low-wage country: That is the question

Abstract

Bibliographical note

UN SDGs

Research Keywords

Access Output

Other Access Options

Permanent Link

Other Files and Links

Fingerprint

Cite this