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International Trade and Unemployment - the Worker-Selection Effect

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  • Marco de Pinto

    ()
    (University of Kassel)

  • Jochen Michaelis

    ()
    (University of Kassel)

Abstract

This paper analyzes how trade liberalization influences the unemployment rate of workers with different abilities. We refine the Melitz (2003) framework to account for trade unions and heterogeneous workers, who differ with respect to their abilities. Our main ?findings are: (i) high ability workers profit from trade liberalization in terms of higher wages and higher employment; (ii) the least efficient workers loose their job and switch to long-term unemployment (worker-selection effect); (iii) if a country is endowed with a large fraction of low-skilled workers, trade liberalization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a countrys welfare.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/27-2011_michaelis.pdf
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201127.

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Length: 29 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201127

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Keywords: trade liberalization; trade unions; skill-specific unemployment;

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References

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Citations

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Cited by:
  1. Marco de Pinto, 2012. "The Redistribution of Trade Gains and the Equity-Efficiency Trade-Off," IAAEU Discussion Papers 201206, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  2. Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," MAGKS Papers on Economics 201210, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Jochen Michaelis & Marco de Pinto, 2014. "The labor market effects of trade unions - Layard meets Melitz," IAAEU Discussion Papers 201406, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  4. Halit Yanikkaya, 2013. "Is trade liberalization a solution to the unemployment problem?," Portuguese Economic Journal, Springer, vol. 12(1), pages 57-85, April.
  5. de Pinto, Marco, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 66059, Verein für Socialpolitik / German Economic Association.
  6. Zierahn, Ulrich, 2012. "The effect of market access on the labor market: Evidence from German reunification," HWWI Research Papers 131, Hamburg Institute of International Economics (HWWI).
  7. Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme for Trade Gains - A Positive Analysis," IAAEU Discussion Papers 201204, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  8. Marco de Pinto, 2012. "Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis," FIW Working Paper series 092, FIW.

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