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A Quantitative Trade Model with Unemployment

Author

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  • Lee, Kyu Yub

    (Korea Institute for International Economic Policy)

Abstract

Over the last decade, quantifying the welfare effects from tariff changes has become one of the main challenges among international trade economists. There are a number of quantitative trade models with micro-foundations which emphasize demand-side (Anderson and Van Wincoop 2003), supply-side (Eaton and Kortum 2002), Bertrand competition (Bernard et al. 2003), extensive and intensive margin (Chaney 2008), etc, and conclude that trade liberalization with tariff reductions leads an economy to reach a higher level of welfare compared to pre-liberalization (Costinot and Rodriguez-Clare 2014). While elegant, these models inducing gravity equations share the common assumption, a perfect labor market. Quantitative trade models with full-employment developed so far have not taken account of labor market frictions when evaluating the welfare effects from tariff changes. This paper aims to fill the gap in the trade literature by explicitly considering labor market frictions.

Suggested Citation

  • Lee, Kyu Yub, 2018. "A Quantitative Trade Model with Unemployment," Working Papers 18-4, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepwp:2018_004
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    More about this item

    Keywords

    Quantitative Trade Model; Unemployment; Welfare;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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