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International Trade and Unemployment: A Quantitative Framework

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  • Heid, Benedikt
  • Larch, Mario

Abstract

Quantifying the welfare effects of trade liberalization is a core issue in international trade. Existing frameworks assume perfect labor markets and therefore ignore the effects of aggregate employment changes for welfare. We develop a quantitative trade framework which explicitly models labor market frictions. To illustrate, we assess the effects of trade and labor market reforms for 28 OECD countries. Welfare effects of trade agreements are magnified when accounting for employment changes. While employment and welfare increase in most countries, some experience higher unemployment and lower welfare. Labor market reforms in one country have small positive spillover effects on trading partners.

Suggested Citation

  • Heid, Benedikt & Larch, Mario, 2013. "International Trade and Unemployment: A Quantitative Framework," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79824, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79824
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    Cited by:

    1. Sirries, Steffen & Larch, Mario, 2014. "International Trade and MIgration: A Quantitative Framework," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100516, Verein für Socialpolitik / German Economic Association.
    2. Pessoa, João Paulo, 2016. "International competition and labor market adjustment," LSE Research Online Documents on Economics 66426, London School of Economics and Political Science, LSE Library.
    3. Gabriel Felbermayr & Mario Larch & Mario Larch, 2014. "Transatlantic Free Trade: Questions and Answers from the Vantage Point of Trade Theory," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(04), pages 03-17, January.
    4. Fritz Breuss, 2014. "TTIP und ihre Auswirkungen auf Österreich. Ein kritischer Literaturüberblick," WIFO Working Papers 468, WIFO.
    5. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    6. Brändle, Tobias & Kalweit, René, 2016. "The Employment Effects of the EU Eastern Enlargement in Germany," VfS Annual Conference 2016 (Augsburg): Demographic Change 145502, Verein für Socialpolitik / German Economic Association.
    7. repec:gnv:wpaper:unige:77631 is not listed on IDEAS
    8. Sebastian Benz & Erdal Yalcin, 2015. "Productivity Versus Employment: Quantifying the Economic Effects of an EU–Japan Free Trade Agreement," The World Economy, Wiley Blackwell, vol. 38(6), pages 935-961, June.
    9. Céline Carrère & Anja Grujovic & Frédéric Robert-Nicoud, 2020. "Trade and Frictional Unemployment in the Global Economy," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 2869-2921.
    10. Gabriel Felbermayr, 2016. "Economic Analysis of TTIP," ifo Working Paper Series 215, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. Bekkers, Eddy & Rojas-Romagosa, Hugo, 2016. "Quantitative trade models and the economic assessment of TTIP," Conference papers 332769, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Gabriel Felbermayr & Mario Larch, 2014. "Transatlantic Free Trade: Questions and Answers from the Vantage Point of Trade Theory," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(4), pages 03-17, January.
    13. Koffi Kpognon & Henri Atangana Ondoa & Mamadou Bah & Marie Fanny Messe, 2020. "Ouverture commerciale, institutions du marché du travail et emploi des jeunes en Afrique," African Development Review, African Development Bank, vol. 32(S1), pages 91-105, November.
    14. Malik Shahzad Shabbir, Aniqa Zeb, 2019. "Determinants of Economic Stability through Female Unemployment: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 4(1), pages 19-30, March.
    15. Heid, Benedikt, 2014. "Preferential Trade Agreements, Unemployment, and the Informal Sector," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100376, Verein für Socialpolitik / German Economic Association.

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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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