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Unemployment and interactions between trade and labour market institutions

  • Hervé Boulhol

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

There is ample evidence that a country's labour market institutions are important determinants of unemployment. This study generalises Davis' (1998) idea according to which the institutions of the trade partners matter also for a country's equilibrium unemployment rate as they generate comparative advantages. Moreover, the empirical investigation provides some evidence that the interactions between bilateral trade and relative labour market regulations affect the equilibrium unemployment rate. Given data limitations in this area, the ambition of this paper is merely to draw the attention to the general relevance of these interactions as complementing factors to other explanations of unemployment. Another interesting finding is that a fairly low regulated country like Canada can be negatively affected because its main trading partner is even less regulated, while a high regulated country like Germany appears rather sheltered because its trading partners are also highly regulated.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00261478.

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Date of creation: Jan 2008
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Handle: RePEc:hal:cesptp:halshs-00261478
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00261478
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