Comparative Advantage and Unemployment
University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)
University of Rochester - Department of Economics; Yonsei University - Department of Economics
Concordia University, Quebec - Department of Economics
NBER Working Paper No. w15030
We model unemployment allowing workers to differ by comparative advantage in market work. Workers with comparative advantage are identified by who works more hours when employed. This enables us to test the model by grouping workers based on their long-term wages and hours from panel data. The model captures the greater cyclicality of employment for workers with low comparative advantage. But the model fails to explain the magnitude of countercyclical separations for high-wage workers or the magnitude of procyclical findings for high-hours workers. As a result, it only captures the cyclicality of the extensive, employment margin for low-wage, low-hours workers.
Number of Pages in PDF File: 35working papers series
Date posted: June 3, 2009
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