This paper examines the effect of trade reform on wages and unemployment in a two-sector, three-good economy in which …, lowers wages in all production sectors in the short and the medium run but has an ambiguous effect on unemployment. Although … employment and production of exportables expand in the medium run, the unemployment rate may rise or fall depending on whether …

employment and the level of unemployment in a two-sector economy with a heterogenous work force. Efficiency wage considerations …