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De-Globalization, Welfare State Reforms and Labor Market Outcomes

Author

Listed:
  • Hassan Molana

    (University of Dundee)

  • Catia Montagna

    (University of Aberdeen)

  • George E. Onwordi

    (University of Aberdeen)

Abstract

Within an open economy framework characterized by vertical linkages in production, and search frictions with two-sided heterogeneity in the labor market, raising trade barriers is shown to increase unemployment across skill levels and to reduce labor market participation and aggregate income. These effects are not necessarily moderated by maintaining frictionless mobility of capital across borders. We find that a flexicurity reform of a liberal welfare state can dampen the adverse effects of de-globalization.

Suggested Citation

  • Hassan Molana & Catia Montagna & George E. Onwordi, 2021. "De-Globalization, Welfare State Reforms and Labor Market Outcomes," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(4), pages 624-655, December.
    • Handle: RePEc:pal:imfecr:v:69:y:2021:i:4:d:10.1057_s41308-021-00150-8
    DOI: 10.1057/s41308-021-00150-8
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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F6 - International Economics - - Economic Impacts of Globalization

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