We develop a simple and tractable two-sector search model featuring a non-traded sector and endogenous search unemployment to examine the impact of terms of trade shocks on unemployment. We show that changes in terms of trade will not only lead to employment reallocation across sectors, as in the traditional trade models, but more importantly, impact upon search unemployment within each sector. Specifically, we show that an improvement (deterioration) of terms of trade reduces (increases) unemployment rates in both traded and non-traded sectors.
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number
c012_025.
Find related papers by JEL classification: F16 - International Economics - - Trade - - - Trade and Labor Market Interactions F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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