Market integration between developing countries and urban unemployment-the perspective of the real minimum wage

This article examines the effect of market integration through free trade and factor mobility on the urban unemployment rate of a developing country whose economy is large enough to influence the terms of trade. From the perspective of the real minimum wage, it is shown that free trade would result in a rise or a decline in the country's urban unemployment rate, depending on its trade pattern. While the effect of labour mobility on a country's urban unemployment rate is determined by the difference between the ratio of would-be farmers to incoming workers and that of farm leavers to outgoing workers, the result of capital mobility will depend on a comparison of the initial urban unemployment rates of two countries.