Creative Destruction and Unemployment in an Open Economy Model
AbstractI develop a model of endogenous economic growth and search and matching frictions in the labor market. I study the effect of trade liberalization between two identical economies on unemployment. I solve for two versions of the growth model, the first one where trade liberalization has only a temporary effect on growth, a semi-endogenous growth model. In the second version trade liberalization has a permanent effect on growth, a fully endogenous growth model. I show that in both versions trade liberalization has a steady state effect on unemployment that can be either negative or positive depending on parameters
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1820.
Length: 27 pages
Date of creation: Jan 2013
Date of revision:
Creative destruction; unemployment; trade liberalization;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-DGE-2013-02-03 (Dynamic General Equilibrium)
- NEP-FDG-2013-02-03 (Financial Development & Growth)
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