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Labour Market Frictions, Firm Growth, and International Trade

Author

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  • Pablo D Fajgelbaum

Abstract

I study the aggregate effects of labour market frictions in a small open economy where firms grow slowly and make fixed export investments. The model features interactions between dynamic investments in exporting and search frictions with job-to-job mobility. A calibration to Argentina's economy matching data on firm growth, worker transitions between firms, and export dynamics suggests that the real income gains from lowering frictions in job-to-job transitions are about seven times larger than comparable reductions in frictions from unemployment. Barriers to worker mobility across firms matter for the real income gains of trade-cost reductions.

Suggested Citation

  • Pablo D Fajgelbaum, 2020. "Labour Market Frictions, Firm Growth, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(3), pages 1213-1260.
    • Handle: RePEc:oup:restud:v:87:y:2020:i:3:p:1213-1260.
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    File URL: http://hdl.handle.net/10.1093/restud/rdz063
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    Citations

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    Cited by:

    1. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Ayşegül Şahin, 2017. "Gross Worker Flows over the Business Cycle," American Economic Review, American Economic Association, vol. 107(11), pages 3447-3476, November.
    2. Ragnhild Balsvik & Doireann Fitzgerald & Stephanie Haller, 2023. "The Impact of Multinationals Along the Job Ladder," Staff Report 651, Federal Reserve Bank of Minneapolis.
    3. Christian Holzner & Mario Larch, 2022. "Convex vacancy creation costs and on‐the‐job search in a global economy," The World Economy, Wiley Blackwell, vol. 45(1), pages 136-175, January.

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