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International Trade and Unemployment: A Quantitative Framework

Benedikt Heid () and Mario Larch ()

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Quantifying the welfare effects of trade liberalization is a core issue in international trade. Existing frameworks assume perfect labor markets and therefore ignore the effects of aggregate employment changes for welfare. We develop a quantitative trade framework which explicitly models labor market frictions. To illustrate, we assess the effects of trade and labor market reforms for 28 OECD countries. Welfare effects of trade agreements are magnified when accounting for employment changes. While employment and welfare increase in most countries, some experience higher unemployment and lower welfare. Labor market reforms in one country have small positive spillover effects on trading partners.

JEL-codes: F16 F13 F14 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-int
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Working Paper: International Trade and Unemployment: A Quantitative Framework (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79824

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