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Unemployment and relative labor market institutions between trading partners

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  • Boulhol, Hervé

Abstract

This paper contributes to the literature that highlights the role of trading partners' institutions for a country's unemployment rate. The objective is to study whether the results established in the minimum wage-setting of Davis (1998) hold when unemployment is driven by search frictions. This paper finds that relative labor market institutions matter for equilibrium unemployment as they generate comparative advantages, but there are two main differences with Davis. With North-North trade, unemployment decreases in the low-regulation country. When South is brought into the picture, low-regulation North is not insulated, and unemployment increases in both developed countries as a result of specialization.

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Bibliographic Info

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

Volume (Year): 83 (2011)
Issue (Month): 1 (January)
Pages: 83-91

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Handle: RePEc:eee:inecon:v:83:y:2011:i:1:p:83-91

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

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Keywords: Unemployment Labor Market Institutions Trade;

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References

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  1. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
  2. Alejandro Cuñat & Marc J. Melitz, 2012. "Volatility, Labor Market Flexibility, And The Pattern Of Comparative Advantage," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 225-254, 04.
  3. Hervé Boulhol, 2006. "Do capital market and trade liberalization trigger labor market deregulation ?," Cahiers de la Maison des Sciences Economiques bla06062, Université Panthéon-Sorbonne (Paris 1).
  4. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  5. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  6. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  8. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  9. Saint-Paul, Gilles, 2004. "Why Are European Countries Diverging in Their Unemployment Experience?," IZA Discussion Papers 1066, Institute for the Study of Labor (IZA).
  10. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
  11. Carl Davidson & Steven J. Matusz, 2005. "Trade and Turnover: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 861-880, November.
  12. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  13. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
  14. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, 04.
  15. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
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Cited by:
  1. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2010. "North-South technology transfer in unionised multinationals," Working Papers in Economics 09/10, University of Bergen, Department of Economics.
  2. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.

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