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On the heterogeneous effect of trade on unemployment

Author

Listed:
  • Céline CARRERE

    (Université de Genève)

  • Marco FUGAZZA

    (FERDI)

  • Marcelo OLARREAGA

    (Université de Genève)

  • Frédéric ROBERT-NICOUD

    (FERDI)

Abstract

We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade reduces unemployment in countries with comparative advantage in sectors with more efficient labor markets and leads to higher unemployment in countries with comparative advantage in sectors with less efficient labor markets. We test this prediction in a panel dataset of 107 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.

Suggested Citation

  • Céline CARRERE & Marco FUGAZZA & Marcelo OLARREAGA & Frédéric ROBERT-NICOUD, 2016. "On the heterogeneous effect of trade on unemployment," Working Papers P180, FERDI.
    • Handle: RePEc:fdi:wpaper:3421
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    1. Carrère, Céline & Fugazza, Marco & Olarreaga, Marcelo & Robert-Nicoud, Frédéric, 2020. "Comparative advantage and equilibrium unemployment," European Economic Review, Elsevier, vol. 127(C).

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    More about this item

    Keywords

    Trade; Search unemployment;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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