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Frontiers of Economics in China

Front. Econ. China    2015, Vol. 10 Issue (4) : 664-690     DOI: 10.3868/s060-004-015-0031-2
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Unemployment and Economic Integration for Developing Countries
Haiwen Zhou()
Department of Economics, Old Dominion University, Norfolk, VA 23529, USA
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While financial or trade integration between countries may increase the size of the market and aid the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing sector. While financial or trade integration between developing countries leads manufacturing firms to adopt more advanced technologies, the level and rate of employment in the manufacturing sector will not deteriorate.

Keywords unemployment      economic development      financial integration      international trade      choice of technology     
Issue Date: 28 December 2015
 Cite this article:   
Haiwen Zhou. Unemployment and Economic Integration for Developing Countries[J]. Front. Econ. China, 2015, 10(4): 664-690.
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