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

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Author Info
Jansen, Marion
Turrini, Alessandro Antonio

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

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. James Levinsohn, 1996. "Firm Heterogeneity, Jobs, and International Trade: Evidence from Chile," NBER Working Papers 5808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
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  7. 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.
  8. 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. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Heijdra, Ben J. & Keuschnigg , Christian & Kohler, Wilhelm, 2002. "Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Paolo Epifani & Gino Gancia, 2002. "Geography, Migrations and Equilibrium Unemployment," CESPRI Working Papers 128, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Jul 2001. [Downloadable!]
    Other versions:
  3. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank. [Downloadable!]
    Other versions:
  4. Ben J. Heijdra & Christian Keuschnigg, 2000. "Integration and Search Unemployment: An Analysis of Eastern EU Enlargement," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Paolo Epifani, 1998. "Globalization and Regional Unemployment Divergence in the EU Countries," LIUC Papers in Economics 59, Cattaneo University (LIUC). [Downloadable!]
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