 Globalization and Labour-Market Adjustment: How Fast and at What Cost?Carl Davidson () and Steven Matusz Oxford Review of Economic Policy, 2000, vol. 16, issue 3, 42-56 Abstract: In this paper we argue that the flexibility of an economy's labour market plays a role in determining the gains from trade liberalization, the level of short-run adjustment costs, and the relative value of these two measures. To do so, we describe the model introduced in Davidson and Matusz (2000) which allows us to solve for adjustment costs when workers vary according to ability and jobs differ in terms of the skills that they require. We then report results based on simulations of this model. We find that economies with sluggish labour markets have the least to gain from liberalization. The reason is that while the removal of trade barriers creates large benefits, they are almost completely offset by large short-run adjustment costs. In contrast, we find that with either very flexible or very slothful labour market gains from liberalization are always significantly larger than the short-run adjustment costs. Copyright 2000 by Oxford University Press. Date: 2000 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:16:y:2000:i:3:p:42-56 Access Statistics for this article Oxford Review of Economic Policy is currently edited by Christopher Adam More articles in Oxford Review of Economic Policy from Oxford University Press and Oxford Review of Economic Policy Limited |
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