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Comparative Advantage and Unemployment

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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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_547.pdf
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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 547.

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Length: 34 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:roc:rocher:547
Contact details of provider: Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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