Delay and dynamics in labor market adjustment: Simulation results

Erhan Artuc, Shubham Chaudhuri and John McLaren

Journal of International Economics, 2008, vol. 75, issue 1, 1-13

Abstract: We simulate numerically a trade model with labor mobility costs added, modeled in such a way as to generate gross flows in excess of net flows. Adjustment to a trade shock can be slow with plausible parameter values. In our base case, the economy moves 95% of the distance to the new steady state in approximately eight years. Gross flows have a large effect on this rate of adjustment and on the normative effects of trade. Announcing and delaying the liberalization can build - or destroy - a constituency for free trade. We study the conditions under which these contrasting outcomes occur.

Keywords: Labor; mobility; Gross; flows; Net; flows; Gradualism; Trade; shocks; Trade; liberalization (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (35)

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Working Paper: Delay and Dynamics in Labor Market Adjustment: Simulation Results (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:75:y:2008:i:1:p:1-13

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