Country 1, Real wages
50-
45-
40-
35-
30-
25-
0.<
15
0
30
45
τ (%)
0.8 60
b1
Country 2, Real wages
50-,
45-
40-
35-
30
0.4
0
15
30
0.8 60
45
b1
τ (%)
Figure A6: Country 1 labor market regulation and real wages in countries 1 and 2 (=3),
when ν = 1 and firms are homogeneous. This corresponds to a Krugman (1980) economy.
[Real wages on the vertical axis.]
Country 1, Real wages
85-
80-
75-
70-
65-
60-
0.<
15
0
30
45
τ (%)
0.8 60
b1
Country 2, Real wages
85-.
80-
75-
70-
65
60
0.4
0
15
45
0.8 60
τ (%)
b1
30
Figure A7: Country 1 labor market regulation and real wages in countries 1 and 2 (=3),
when ν = 0 and firms are homogeneous. [Real wages on the vertical axis.]
56
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