Labor Market Frictions, Firm Growth, and International Trade

69 Pages Posted: 5 Oct 2013 Last revised: 5 Apr 2021

See all articles by Pablo D. Fajgelbaum

Pablo D. Fajgelbaum

University of California, Los Angeles (UCLA)

Date Written: October 2013

Abstract

I study the aggregate effects of labor 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 7 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.

Suggested Citation

Fajgelbaum, Pablo D., Labor Market Frictions, Firm Growth, and International Trade (October 2013). NBER Working Paper No. w19492, Available at SSRN: https://ssrn.com/abstract=2336358

Pablo D. Fajgelbaum (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

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