Lewer & van den Berg

Assume instead that wages are sticky in the very short-run, after PC falls. What will happen to employment in each sector? What will be the temporary unemployment rate, as a percentage of the total labor endowment?

I. Consider a standard Heckscher-Ohlin model of trade between the United States and the European Union, in which the only resources are capital (K) and labor (L), and the only goods are chemicals (C) and electronics (E), both produced under perfect competition, with constant returns to scale, diminishing marginal returns, identical technologies, and identical preferences, […]

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