Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing
We show how international trade, migration and outsourcing affect unemployment of skilled and unskilled labor, in a framework that integrates the Heckscher-Ohlin model of trade with the Shapiro-Stiglitz model of unemployment. Our approach allows us to analyze changes in not only aggregate unemployment, but also the distribution of unemployment between skilled and unskilled labor. As the analysis demonstrates, the unemployment rates of these two types of labor often move in opposite directions, thereby dampening the change in aggregate unemployment. Results depend on the source of comparative advantage, based on international differences in (for example) unemployment insurance or production technology.
|Date of creation:||Sep 2008|
|Date of revision:||Nov 2010|
|Publication status:||Published: Revised version in Review of International Economics, Vol. 18, No. 5 (November 2010), pp. 990-1000|
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