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Job creation, job destruction, and the international division of labour

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  • JANSEN, Marion

    (Pompeu Fabra University, Barcelona and Maxwell Stamp, London)

  • TURRINI, Alessandro

    ()
    (University of Bergamo, Cespri-Bocconi, Milan and CORE, Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

We incorporate equilibrium unemployment due to imperfect matching into a model of trade in intermediate inputs (Ethier (1982)). Firms are assumed to be price takers and their size is given by technology. Firms enter the market as long as expected profits cover the search cost they incur initially. Trade increases productivity in the final good and then demand for each intermediate input. Steady state unemployment is reduced after trade integration because more vacancies are opened. When the rate of job destruction is made endogenous, international trade reduces the equilibrium rate of jub destruction and this induces an indirect positive effect on job creation. We also show that the more volatile environment faced by firms that is often associated with deeper trade integration is unlikely, per-se, to increase unemployment.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998064.

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Date of creation: 01 Oct 1998
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Handle: RePEc:cor:louvco:1998064

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Keywords: Job creation; job destruction; unemployment; international trade; increasing returns.;

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References

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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  2. Copeland, Brian R., 1989. "Efficiency wages in a Ricardian model of international trade," Journal of International Economics, Elsevier, vol. 27(3-4), pages 221-244, November.
  3. 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.
  4. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  5. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  6. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-93, December.
  7. 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.
  8. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  9. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  10. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  11. James Levinsohn, 1996. "Firm Heterogeneity, Jobs, and International Trade: Evidence from Chile," NBER Working Papers 5808, National Bureau of Economic Research, Inc.
  12. Brecher, Richard A., 1992. "An efficiency-wage model with explicit monitoring : Unemployment and welfare in an open economy," Journal of International Economics, Elsevier, vol. 32(1-2), pages 179-191, February.
  13. Davidson, C. & Martin, L. & Matusz, S., 1988. "Multiple Free Trade Equilibria In A Model Of Frictional Unemployment," Papers 8716, Michigan State - Econometrics and Economic Theory.
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Cited by:
  1. Paolo Epifani, 1998. "Globalization and Regional Unemployment Divergence in the EU Countries," LIUC Papers in Economics 59, Cattaneo University (LIUC).
  2. Ben J. Heijdra & Christian Keuschnigg, 2000. "Integration and Search Unemployment: An Analysis of Eastern EU Enlargement," CESifo Working Paper Series 341, CESifo Group Munich.
  3. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers 7, United Nations, Department of Economics and Social Affairs.
  4. Ben J. Heijdra & Christian Keuschnigg & Wilhelm Kohler, 2002. "Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries," CESifo Working Paper Series 718, CESifo Group Munich.
  5. Paolo Epifani & Gino A. Gancia, 2001. "Geography, Migrations and Equilibrium Unemployment," Development Working Papers 156, Centro Studi Luca d\'Agliano, University of Milano.
  6. Schuster, Philip, 2012. "Employment Protection, Labor Market Turnover, and the Effects of Globalization," Economics Series 288, Institute for Advanced Studies.

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