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Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing

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Abstract

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.

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  • Richard Brecher & Zhiqi Chen, 2008. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Carleton Economic Papers 08-07, Carleton University, Department of Economics, revised Nov 2010.
  • Handle: RePEc:car:carecp:08-07
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    Cited by:

    1. Alan V. Deardorff, 2016. "Local Import Competition in a Lumpy Country," Working Papers 653, Research Seminar in International Economics, University of Michigan.
    2. Richard A. Brecher & Zhiqi Chen, 2014. "Unemployment and welfare consequences of international outsourcing under monopolistic competition," Canadian Journal of Economics, Canadian Economics Association, vol. 47(2), pages 540-554, May.
    3. Heid, Benedikt & Larch, Mario, 2012. "Migration, trade and unemployment," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-40.
    4. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    5. Richard A. Brecher & Zhiqi Chen & Zhihao Yu, 2013. "The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment," The World Economy, Wiley Blackwell, vol. 36(1), pages 1-11, January.
    6. Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
    7. Haiwen Zhou, 2015. "Unemployment and Economic Integration for Developing Countries," Frontiers of Economics in China, Higher Education Press, vol. 10(4), pages 664-690, December.
    8. Zhou, Haiwen, 2017. "Impact of International Trade on Unemployment under Oligopoly," MPRA Paper 81354, University Library of Munich, Germany.

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