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International Trade and Unemployment - the Worker-Selection Effect

  • Marco de Pinto


    (University of Kassel)

  • Jochen Michaelis


    (University of Kassel)

This paper analyzes how trade liberalization influences the unemployment rate of workers with different abilities. We refine the Melitz (2003) framework to account for trade unions and heterogeneous workers, who differ with respect to their abilities. Our main ?findings are: (i) high ability workers profit from trade liberalization in terms of higher wages and higher employment; (ii) the least efficient workers loose their job and switch to long-term unemployment (worker-selection effect); (iii) if a country is endowed with a large fraction of low-skilled workers, trade liberalization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a countrys welfare.

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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201127.

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Length: 29 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201127
Contact details of provider: Postal: Universitätsstraße 25, 35037 Marburg
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