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Comparative Advantage and Unemployment

  • Mark Bils
  • Yongsung Chang
  • Sun-Bin Kim

We model unemployment allowing workers to differ by comparative advantage in market work. Workers with comparative advantage are identified by who works more hours when employed. This enables us to test the model by grouping workers based on their long-term wages and hours from panel data. The model captures the greater cyclicality of employment for workers with low comparative advantage. But the model fails to explain the magnitude of countercyclical separations for high-wage workers or the magnitude of procyclical findings for high-hours workers. As a result, it only captures the cyclicality of the extensive, employment margin for low-wage, low-hours workers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15030.

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Date of creation: Jun 2009
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Publication status: published as Bils, Mark & Chang, Yongsung & Kim, Sun-Bin, 2012. "Comparative advantage and unemployment," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 150-165.
Handle: RePEc:nbr:nberwo:15030
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