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Unemployment and interactions between trade and labour market institutions

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Abstract

There is ample evidence that a country's labour market institutions are important determinants of unemployment. This study generalises Davis' (1998) idea according to which the institutions of the trade partners matter also for a country's equilibrium unemployment rate as they generate comparative advantages. Moreover, the empirical investigation provides some evidence that the interactions between bilateral trade and relative labour market regulations affect the equilibrium unemployment rate. Given data limitations in this area, the ambition of this paper is merely to draw the attention to the general relevance of these interactions as complementing factors to other explanations of unemployment. Another interesting finding is that a fairly low regulated country like Canada can be negatively affected because its main trading partner is even less regulated, while a high regulated country like Germany appears rather sheltered because its trading partners are also highly regulated.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2008/Bla08016.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number bla08016.

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Length: 39 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:mse:cesdoc:bla08016

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Keywords: Unemployment; trade; labour market institutions.;

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Cited by:
  1. 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).
  2. Braun, Sebastian & Spielmann, Christian, 2012. "Wage subsidies and international trade: When does policy coordination pay?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(30), pages 1-42.

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