Trade Reform and Capital Mobility in Efficiency Wage Model

Trade reform produces ambiguous results in the global economy. Some countries enjoy the benefits of trade reform, while some others suffer from this policy. The main purpose of this paper is to analyse the impact of trade reform on unemployment and the size of the informal sector in an efficiency wage model with capital mobility. My analysis shows that nature of capital mobility plays crucial role to determine the impact of trade reform on urban unemployment and the size of the informal sector