The Effect of International Trade on Labor‐Demand Elasticities: Intersectoral Matters

Sebastien Jean

Review of International Economics, 2000, vol. 8, issue 3, 504-516

Abstract: This paper studies the impact of trade on the price‐elasticity of aggregate labor demand, based on the idea that a variation in the cost of (a given type of) labor has an effect on the sectoral trade specialization of an economy, at the expense of the domestic productions using this factor intensively, even when the trade balance is kept unchanged. As this effect is more important the more open the economy, trade openness induces an increase in the associated labor‐demand elasticity, at least if the country has a comparative disadvantage in the industries using intensively the type of labor considered. This argument is illustrated by a simple model, based on an Armington hypothesis, with an empirical assessment for France.

Date: 2000
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