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Job Creation, Job Destruction, and the International Division of Labor

Author

Listed:
  • Marion Jansen
  • Alessandro Turrini

Abstract

The authors incorporate equilibrium unemployment due to imperfect matching into a model of trade in intermediate inputs. Firms are assumed to be price-takers and their size is given by technology. Firms enter the market as long as expected profits cover the search cost they incur initially; jobs are endogenously destroyed by random shocks that affect firms' price-cost margins. Trade increases productivity in the final good and then demand for each intermediate input. Steady-state unemployment is reduced after trade integration because the rate of job destruction is reduced, which in turn induces an indirect positive effect on job creation. A more volatile environment faced by firms does not necessarily increase unemployment. However, the rate of job destruction unambiguously rises, and rises more under free trade. Copyright Blackwell Publishing Ltd 2004.

Suggested Citation

  • Marion Jansen & Alessandro Turrini, 2004. "Job Creation, Job Destruction, and the International Division of Labor," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 476-494, August.
  • Handle: RePEc:bla:reviec:v:12:y:2004:i:3:p:476-494
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    References listed on IDEAS

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    Cited by:

    1. Ben J Heijdra & Christian Keuschnigg & Wilhelm Kohler, 2014. "Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries," World Scientific Book Chapters,in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 2, pages 37-83 World Scientific Publishing Co. Pte. Ltd..
    2. Ben J. Heijdra & Christian Keuschnigg, 2000. "Integration and Search Unemployment: An Analysis of Eastern EU Enlargement," CESifo Working Paper Series 341, CESifo Group Munich.
    3. Marion Jansen & Alessandro Turrini, 2004. "Job Creation, Job Destruction, and the International Division of Labor," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 476-494, August.
    4. Paolo Epifani & Gino A. Gancia, 2001. "Geography, Migrations and Equilibrium Unemployment," Development Working Papers 156, Centro Studi Luca d'Agliano, University of Milano.
    5. Schuster, Philip, 2012. "Employment Protection, Labor Market Turnover, and the Effects of Globalization," Economics Series 288, Institute for Advanced Studies.
    6. Paolo Epifani, 1998. "Globalization and Regional Unemployment Divergence in the EU Countries," LIUC Papers in Economics 59, Cattaneo University (LIUC).
    7. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers 7, United Nations, Department of Economics and Social Affairs.
    8. repec:dgr:rugccs:200213 is not listed on IDEAS

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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