Labor-Cost Effects on Relative Prices between Regions of a Monetary Union: Implications for the EMU

摘要: Three industrial organization (IO) models suggested by Dornbusch (1987) are here adapted to study the labor-cost effects on relative prices of tradable goods between regions a monetary union. The assumption imperfect and segmented labor markets makes analysis best suited for union such as present European EMU. We find that in this context type extent studied depend different degree competition same industry countries, absolute or number foreign domestic firms market each country, product substitutability. Very simple simulations show potentiality IO dynamic framework.