Unemployment effects of trade with a low‐wage country: A minimum‐wage model with sector‐specific factors

Contrary to conventional wisdom, this paper shows that a high-wage economy can paradoxically reduce its level of aggregate unemployment by engaging in international trade with low-wage country. We demonstrate possibility after introducing minimum wage into the basic specific-factor model (with immobile capital and mobile labor), even though opposite result is known arise longer-run framework standard Heckscher–Ohlin–Samuelson both inputs mobile). Our provides cautionary note for public-policy discussions promote barriers as way unemployment.