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Job Creation, Job Destruction, and the International Division of Labour

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  • Jansen, Marion
  • Turrini, Alessandro Antonio

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 job 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2472.

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Date of creation: Jun 2000
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Handle: RePEc:cpr:ceprdp:2472

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Keywords: Increasing Returns; International Trade; Job Creation; Job Destruction; Unemployment;

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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. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers, Stockholm - International Economic Studies 661, Stockholm - International Economic Studies.
  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. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 88(1), pages 98-116, February.
  5. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. Davidson, C. & Martin, L. & Matusz, S., 1988. "Multiple Free Trade Equilibria In A Model Of Frictional Unemployment," Papers, Michigan State - Econometrics and Economic Theory 8716, Michigan State - Econometrics and Economic Theory.
  9. Levinsohn, J., 1996. "Frim Heterogeneity, Jobs, and International Trade: Evidence from Chile," Working Papers, Research Seminar in International Economics, University of Michigan 390, Research Seminar in International Economics, University of Michigan.
  10. 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.
  11. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 959-73, October.
  12. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  13. 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, University of Chicago Press, vol. 96(6), pages 1267-93, December.
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Cited by:
  1. Heijdra, Ben J. & Keuschnigg, Christian & Kohler, Wilhelm, 2002. "Eastern enlargement of the EU: jobs, investment and welfare in present member countries," CCSO Working Papers, University of Groningen, CCSO Centre for Economic Research 200213, University of Groningen, CCSO Centre for Economic Research.
  2. Paolo Epifani, 1998. "Globalization and Regional Unemployment Divergence in the EU Countries," LIUC Papers in Economics, Cattaneo University (LIUC) 59, Cattaneo University (LIUC).
  3. Schuster, Philip, 2012. "Employment Protection, Labor Market Turnover, and the Effects of Globalization," Economics Series 288, Institute for Advanced Studies.
  4. Ben J. Heijdra & Christian Keuschnigg, 2000. "Integration and Search Unemployment: An Analysis of Eastern EU Enlargement," CESifo Working Paper Series 341, CESifo Group Munich.
  5. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers, United Nations, Department of Economics and Social Affairs 7, United Nations, Department of Economics and Social Affairs.
  6. Paolo Epifani & Gino Gancia, 2002. "Geography, Migrations and Equilibrium Unemployment," KITeS Working Papers, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy 128, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2001.

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