How an export boom affects unemployment

Noel Gaston and Gulasekaran Rajaguru ()

Economic Modelling, 2013, vol. 30, issue C, 343-355

Abstract: Does trade affect the equilibrium rate of unemployment? To answer this question, we propose a small open economy model that incorporates realistic features of labour markets. The model predicts that a sustained improvement in the terms of trade lowers unemployment. We test this prediction for the case of Australia, an economy that is subject to large terms of trade movements. We use a novel technique to estimate the structural model based on a combination of traditional econometric procedures and the calibration of time-varying parameters. Both reduced form and the structural estimates reveal strong evidence that higher export prices, capital accumulation in tradeable goods industries and lower unemployment benefits reduce the equilibrium unemployment rate.

Keywords: Equilibrium unemployment rate; Structural model; Calibration; Dutch disease (search for similar items in EconPapers)
JEL-codes: C23 E24 F16 J51 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: How an Export Boom affects Unemployment (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:343-355

DOI: 10.1016/j.econmod.2012.09.007

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