Efficiency-Wage vs Job-Search - a Theoretical Implication for the Trade Policy

The present paper deals with the two outstanding theories of unemployment: job-search theory and efficiency-wage theory. These two theories explain urban unemployment in different ways and have different policy implications for the development economists. The main purpose of this paper is two examine the impact of trade reform on urban unemployment under two economic settings: job-search model and efficiency-wage model. Our analysis shows that the nature of unemployment plays important role in this context