IDEAS home Printed from https://ideas.repec.org/a/spr/portec/v12y2013i1p57-85.html
   My bibliography  Save this article

Is trade liberalization a solution to the unemployment problem?

Author

Listed:
  • Halit Yanikkaya

    ()

Abstract

This paper examines how trade liberalization affects the growth rate of sectoral employment in developed and developing countries. The estimation results imply that trade openness in the form of higher trade volumes has not been successful in generating jobs in developing countries. The overall weak, negative employment response to trade volumes may be explained by the negative output response to trade openness in these countries. Our estimates also indicate that higher trade volumes have adverse effect on industrial employment in developed countries. Moreover, while they have positive effect on employment in industry and services in developing countries, trade barriers have adverse effect on employment growth in services for developed countries. Our overall results imply that while trade barriers have relatively little adverse effects and/or in some case a positive effect on employment both in developing and developed countries, higher trade volumes have an adverse effect on industrial employment in developed economies. Thus, trade openness is not in itself a solution to the unemployment problems of developing countries and yet it has not been the prime factor to blame for the lower employment levels in developed countries. Copyright ISEG 2013

Suggested Citation

  • Halit Yanikkaya, 2013. "Is trade liberalization a solution to the unemployment problem?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(1), pages 57-85, April.
  • Handle: RePEc:spr:portec:v:12:y:2013:i:1:p:57-85
    DOI: 10.1007/s10258-013-0088-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10258-013-0088-9
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Haltiwanger, John & Kugler, Adriana & Kugler, Maurice & Micco, Alejandro & Pagés, Carmen, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Discussion Paper Series In Economics And Econometrics 0410, Economics Division, School of Social Sciences, University of Southampton.
    2. Levinsohn, James, 1999. "Employment responses to international liberalization in Chile," Journal of International Economics, Elsevier, vol. 47(2), pages 321-344, April.
    3. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
    4. Hasan, Rana & Mitra, Devashish & Ranjan, Priya & Ahsan, Reshad N., 2012. "Trade liberalization and unemployment: Theory and evidence from India," Journal of Development Economics, Elsevier, vol. 97(2), pages 269-280.
    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    6. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
    7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    8. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1100-1137.
    9. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
    10. Mauricio Mesquita Moreira & Sheila Najberg, 2000. "Trade liberalisation in Brazil: Creating or exporting jobs?," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 78-99.
    11. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
    12. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
    13. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306 World Scientific Publishing Co. Pte. Ltd..
    14. Marco Pinto & Jochen Michaelis, 2014. "International Trade and Unemployment—the Worker-selection Effect," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 226-252, May.
    15. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    16. Noel Gaston & Daniel Trefler, 1997. "The Labour Market Consequences of the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 18-41, February.
    17. John Haltiwanger & Adriana Kugler & Maurice Kugler & Alejandro Micco & Carmen Pages, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(4), pages 191-208.
    18. Mitra, Devashish & Ranjan, Priya, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute for the Study of Labor (IZA).
    19. Matthew J. Slaughter, 1999. "Globalisation and Wages: A Tale of Two Perspectives," The World Economy, Wiley Blackwell, vol. 22(5), pages 609-629, July.
    20. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    21. Slaughter, Matthew J, 1998. "International Trade and Labour-Market Outcomes: Results, Questions, and Policy Options," Economic Journal, Royal Economic Society, vol. 108(450), pages 1452-1462, September.
    22. Heitger, Bernhard & Stehn, Jürgen, 2003. "Trade, technical change, and labour market adjustment," Open Access Publications from Kiel Institute for the World Economy 3101, Kiel Institute for the World Economy (IfW).
    23. Carl Davidson & Steven J. Matusz, 2004. "International Trade and Labor Markets: Theory, Evidence, and Policy Implications," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number itlm, November.
    24. MartÌn Rama, 2003. "Globalization and the Labor Market," World Bank Research Observer, World Bank Group, vol. 18(2), pages 159-186.
    25. Eugene Beaulieu, 2000. "The Canada-U.S. Free Trade Agreement and labour market adjustment in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 540-563, May.
    26. JosÈ Antonio Ocampo, 2002. "Rethinking the development agenda," Cambridge Journal of Economics, Oxford University Press, vol. 26(3), pages 393-407, May.
    27. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 20-43, July.
    28. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, vol. 84(1), pages 26-36, May.
    29. J. Stiglitz, 1998. "More Instruments and Broader Goals: Moving toward the PostWashington Consensus," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    30. Milner, Chris & Wright, Peter, 1998. "Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy," Economic Journal, Royal Economic Society, vol. 108(447), pages 509-528, March.
    31. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
    32. Robert E. Baldwin, 1995. "The Effects of Trade and Foreign Direct Investment on Employment and Relative Wages," NBER Working Papers 5037, National Bureau of Economic Research, Inc.
    33. Bernhard Heitger & J¸rgen Stehn, 2003. "Trade, Technical Change, and Labour Market Adjustment," The World Economy, Wiley Blackwell, vol. 26(10), pages 1481-1502, November.
    34. Tomiura, Eiichi, 2003. "The impact of import competition on Japanese manufacturing employment," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 118-133, June.
    35. Dalia S Hakura, 1997. "The Impact of Trade Prices on Employment and Wages in the United States," IMF Working Papers 97/116, International Monetary Fund.
    36. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
    37. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, April.
    38. Sener, Fuat, 2001. "Schumpeterian unemployment, trade and wages," Journal of International Economics, Elsevier, vol. 54(1), pages 119-148, June.
    39. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 255-284.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Judzik, Dario, 2014. "Heterogeneous labor demand: sectoral elasticity and trade effects in the U.S., Germany and Sweden," MPRA Paper 62768, University Library of Munich, Germany.
    2. Ramazan EKİNCİ & Osman TÜZÜN & Fatih CEYLAN & Hakan KAHYAOĞLU, 2017. "Dışa Açıklık ile İşsizlik Arasındaki İlişki: Seçilmiş AB Ülkeleri ve Türkiye Üzerine Zamana Göre Değişen Parametreli Bir Analiz Algıları," Sosyoekonomi Journal, Sosyoekonomi Society, issue 25.

    More about this item

    Keywords

    Trade liberalization; Sectoral employment; Unemployment; Panel data; Trade policy; F14; F16; J21; J64;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:portec:v:12:y:2013:i:1:p:57-85. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.