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Creative Destruction and Unemployment in an Open Economy Model

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  • Ignat Stepanok

Abstract

I 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 Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1820.

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Length: 27 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:kie:kieliw:1820

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Keywords: Creative destruction; unemployment; trade liberalization;

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References

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  1. Dennis Novy, 2012. "Gravity Redux: Measuring International Trade Costs with Panel Data," CEP Discussion Papers, Centre for Economic Performance, LSE dp1114, Centre for Economic Performance, LSE.
  2. Sener, Fuat, 2001. "Schumpeterian unemployment, trade and wages," Journal of International Economics, Elsevier, Elsevier, vol. 54(1), pages 119-148, June.
  3. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, Elsevier, vol. 78(1), pages 32-44, June.
  4. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Munich Reprints in Economics, University of Munich, Department of Economics 20471, University of Munich, Department of Economics.
  5. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2009. "Trade and Unemployment: What Do the Data Say?," IZA Discussion Papers 4184, Institute for the Study of Labor (IZA).
  6. V. Anton Muscatelli & Patrizio Tirelli, 2001. "Unemployment and growth: some empirical evidence from structural time series models," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(8), pages 1083-1088.
  7. Gibson, John K & Harris, Richard I D, 1996. "Trade Liberalisation and Plant Exit in New Zealand Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 521-29, August.
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Cited by:
  1. Finn Martensen, 2013. "Globalization, Unemployment, and Product Cycles: Short- and Long-Run Effects," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2013-16, Department of Economics, University of Konstanz.

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