Trade in Unemployment

Marcelo Olarreaga, Frederic Robert-Nicoud, Marco Fugazza (marco.fugazza@unctad.org) and Carrère, Céline
Authors registered in the RePEc Author Service: Celine Carrere

No 9916, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade liberalization causes higher unemployment in countries with comparative advantage in sectors with strong labor market frictions and leads to lower unemployment in countries with comparative advantage in sectors with weak labor market frictions. We test this prediction in a panel dataset of 97 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.

Keywords: Trade; Search unemployment (search for similar items in EconPapers)
JEL-codes: F10 F13 F16 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Trade in Unemployment (2014)
Working Paper: Trade in Unemployment (2014)
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