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Delay and dynamics in labor market adjustment: Simulation results

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  • Artuç, Erhan
  • Chaudhuri, Shubham
  • McLaren, John

Abstract

We simulate numerically a trade model with labor mobility costs added, modeled in such a way as to generate gross flows in excess of net flows. Adjustment to a trade shock can be slow with plausible parameter values. In our base case, the economy moves 95% of the distance to the new steady state in approximately eight years. Gross flows have a large effect on this rate of adjustment and on the normative effects of trade. Announcing and delaying the liberalization can build - or destroy - a constituency for free trade. We study the conditions under which these contrasting outcomes occur.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 75 (2008)
Issue (Month): 1 (May)
Pages: 1-13
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Handle: RePEc:eee:inecon:v:75:y:2008:i:1:p:1-13

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Web page: http://www.elsevier.com/locate/inca/505552

For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

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Keywords: Labor mobility Gross flows Net flows Gradualism Trade shocks Trade liberalization;

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Citations

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Cited by:
  1. Falvey, Rod & Greenaway, David & Silva, Joana, 2010. "Trade liberalisation and human capital adjustment," Journal of International Economics, Elsevier, vol. 81(2), pages 230-239, July.
  2. Willmann, Gerald & Blanchard, Emily J., 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," Economics Working Papers 2007,21, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.
  4. John McLaren & Shushanik Hakobyan, 2010. "Looking for Local Labor Market Effects of NAFTA," NBER Working Papers 16535, National Bureau of Economic Research, Inc.
  5. Mitra, Devashish & Ranjan, Priya, 2009. "Offshoring and Unemployment: The Role of Search Frictions and Labor Mobility," IZA Discussion Papers 4136, Institute for the Study of Labor (IZA).
  6. Ornelas, Emanuel, 2012. "Preferential Trade Agreements and the Labor Market," CEPR Discussion Papers 8805, C.E.P.R. Discussion Papers.
  7. Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
  8. Harrison, Ann & McLaren, John & McMillan, Margaret, 2011. "Recent perspectives on trade and inequality," Policy Research Working Paper Series 5754, The World Bank.
  9. Erhan Artuc & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-45, June.
  10. Erhan Artuç, 2009. "Intergenerational Effects of Trade Liberalization," TÜSÝAD-Koç University Economic Research Forum Working Papers 0913, TUSIAD-Koc University Economic Research Forum.
  11. Devashish Mitra & Priya Ranjan, 2009. "Offshoring and Unemployment: The Role of Search Frictions and Labor Minority," Working Papers id:2071, eSocialSciences.

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