Labour Market Frictions, Firm Growth, and International Trade

Pablo D Fajgelbaum

The Review of Economic Studies, 2020, vol. 87, issue 3, 1213-1260

Abstract: I study the aggregate effects of labour market frictions in a small open economy where firms grow slowly and make fixed export investments. The model features interactions between dynamic investments in exporting and search frictions with job-to-job mobility. A calibration to Argentina's economy matching data on firm growth, worker transitions between firms, and export dynamics suggests that the real income gains from lowering frictions in job-to-job transitions are about seven times larger than comparable reductions in frictions from unemployment. Barriers to worker mobility across firms matter for the real income gains of trade-cost reductions.

Keywords: Labour market frictions; Firm growth; International trade; Job-to-job transitions; F16; E24; J64 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:87:y:2020:i:3:p:1213-1260.

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