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FDI, skill-specific unemployment, and institutional spillover effects

Listed author(s):
  • Schmerer, Hans-Jörg

This paper proposes a multi-industry trade model with integrated capital markets and Mortensen and Pissarides search frictions in the labor market. Institutional changes in the model trigger adjustments at the intensive and extensive margin of labor demand. At the extensive margin a shift of the specialization pattern amongst the integrated countries magnifies the effects at the intensive industry margin via trade and FDI. Moreover, the distinction between high- and low-skill workers facilitates the analysis of skill-specific institutional changes. A government can influence wages and unemployment of the low-skilled by manipulating labor market institutions concerning high-skill workers only. One-sided interventions affect all workers at home and abroad irrespective of their level of skill.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Economics Discussion Papers with number 2012-2.

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Date of creation: 2012
Handle: RePEc:zbw:ifwedp:20122
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  1. Mario Larch & Wolfgang Lechthaler, 2009. "Comparative Advantage and Skill-Specific Unemployment," CESifo Working Paper Series 2754, CESifo Group Munich.
  2. Felbermayr, Gabriel & Larch, Mario & Lechthaler, Wolfgang, 2012. "Unemployment in an interdependent world," Kiel Working Papers 1540 [rev.], Kiel Institute for the World Economy (IfW).
  3. Hartmut Egger & Udo Kreickemeier, 2007. "Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation," CESifo Working Paper Series 2000, CESifo Group Munich.
  4. Schmerer, Hans-Jörg, 2012. "Foreign direct investment and search unemployment : Theory and evidence," IAB Discussion Paper 201204, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Beissinger, Thomas, 2002. "The Impact of Labor Market Reforms on Capital Flows, Wages and Unemployment," Royal Economic Society Annual Conference 2002 18, Royal Economic Society.
  6. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
  7. Boulhol, Herv, 2009. "Do capital market and trade liberalization trigger labor market deregulation?," Journal of International Economics, Elsevier, vol. 77(2), pages 223-233, April.
  8. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
  9. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, 04.
  10. Helpman, Elhanan & Itskhoki, Oleg, 2010. "Labour Market Rigidities, Trade and Unemployment," Scholarly Articles 25586655, Harvard University Department of Economics.
  11. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Trade and unemployment: What do the data say?," Munich Reprints in Economics 20381, University of Munich, Department of Economics.
  12. Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tuebingen Working Papers in Economics and Finance 12, University of Tuebingen, Faculty of Economics and Social Sciences.
  13. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
  14. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, September.
  15. Gerald Epstein & Elissa Braunstein, 2002. "Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?," Working Papers wp45, Political Economy Research Institute, University of Massachusetts at Amherst.
  16. Peter Egger & David Greenaway & Tobias Seidel, 2011. "Rigid labour markets with trade and capital mobility: theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 509-540, May.
  17. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Wages, Unemployment and Inequality with Heterogeneous Firms and Workers," NBER Working Papers 14122, National Bureau of Economic Research, Inc.
  18. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 463-479, September.
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