Delay and Dynamics in Labor Market Adjustment: Simulation Results

Erhan Artuc, Shubham Chaudhuri and John McLaren
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Shubham Chaudhuri: East Asia and Pacific Poverty Reduction and Economic Management Department, The World Bank

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

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; Delayed Trade Liberalization (search for similar items in EconPapers)
JEL-codes: F16 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (7)

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Journal Article: Delay and dynamics in labor market adjustment: Simulation results (2008)
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