Efficiency-Wage Unemployment and Intersectoral Wage Differentials in a Heckscher-Ohlin Model

The paper analyzes a Heckscher-Ohlin (HO) model with efficiency-wage unemployment (henceforth HOe model). We show that all HO results have close HOe analogues. Additionally, conditions are derived under which immigrants might not only find employment for themselves but also raise employment for natives. Moreover, we analyze the ranking of countries with respect to their rate of unemployment, showing that this ranking may be reversed as countries move from autarky to trade. All results are clearly linked to factor intensities and the pattern of intersectoral wage differentials. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2001.