Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing

Richard A. Brecher and Zhiqi Chen

Review of International Economics, 2010, vol. 18, issue 5, pages 990-1000

Abstract: We show how international trade, migration, and outsourcing affect unemployment of skilled and unskilled labor, in a framework that integrates the Heckscher-Ohlin model of trade with the Shapiro-Stiglitz model of unemployment. Our approach allows us to analyze changes in not only aggregate unemployment, but also the distribution of unemployment between skilled and unskilled labor. As the analysis demonstrates, the unemployment rates of these two types of labor often move in opposite directions, thereby dampening the change in aggregate unemployment. Results depend on the source of comparative advantage, based on international differences in (for example) unemployment insurance or production technology. Copyright © 2010 Blackwell Publishing Ltd.

Date: 2010
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