Trade and unemployment: What do the data say?

Gabriel Felbermayr, Julien Prat and Hans-Jörg Schmerer

European Economic Review, 2011, vol. 55, issue 6, 741-758

Abstract: This paper documents a robust empirical regularity: in the long-run, higher trade openness is associated with a lower structural rate of unemployment. We establish this fact using: (i) panel data from 20 OECD countries, (ii) cross-sectional data on a larger set of countries. The time structure of the panel data allows us to control for unobserved heterogeneity, whereas cross-sectional data make it possible to instrument openness by its geographical component. In both setups, we purge the data of business cycle effects, include a host of institutional and geographical variables, and control for within-country trade. Our main finding is robust to various definitions of unemployment rates and openness measures. Our benchmark specification suggests that a 10 percentage point increase in total trade openness reduces aggregate unemployment by about three quarters of one percentage point.

Keywords: International; trade; Real; openness; Unemployment; GMM; models; IV; estimation (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (92)

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Related works:
Working Paper: Trade and unemployment: What do the data say? (2011)
Working Paper: Trade and Unemployment: What do the data say? (2009)
Working Paper: Trade and Unemployment: What Do the Data Say? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:55:y:2011:i:6:p:741-758

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