A Simple Theory of Trade and Unemployment in General Equilibrium
AbstractWe develop an open economy general equilibrium model, with auction-based directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by endowment, trade makes both the unemployment rate and the rental in the capital-(labor-) abundant country rise (decline), but does not lead to equalization. Furthermore, the expected wage is higher in the capital-abundant country. If countries differ by technology, trade increases (decreases) the unemployment rate in the country whose technology is relatively superior (inferior) for producing the capital-intensive good.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1116.
Length: 34 pages
Date of creation: 2010
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
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Unemployment; international trade; general equilibrium;
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
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- Moritz Ritter, 2012. "Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions," DETU Working Papers 1204, Department of Economics, Temple University.
- Moritz Ritter, 2012. "Trade and Inequality in a Directed Search Model with Firm and Worker Heterogeneity," DETU Working Papers 1202, Department of Economics, Temple University.
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