International Trade and Unemployment - The Worker‐Selection Effect

27 Pages Posted: 3 Apr 2014

See all articles by Marco de Pinto

Marco de Pinto

University of Applied Labour Studies

Jochen Michaelis

University of Kassel - Economics

Date Written: May 2014

Abstract

This paper investigates the labor market effects of trade liberalization. We incorporate trade unions and heterogeneous workers into the Melitz framework. Workers differ with respect to their abilities. Our main findings are: (i) trade liberalization harms low‐ability workers, they lose their job and switch to long‐term unemployment (worker‐selection effect); (ii) high‐ability workers are better off in terms of both higher wages and higher employment; (iii) if a country is endowed with a large fraction of low‐ability workers, trade liberalization leads to a rise in aggregate unemployment — in this case, trade liberalization may harm a country's welfare; (iv) the overall employment and welfare effect crucially hinges on the characteristics of the wage bargain.

Suggested Citation

de Pinto, Marco and Michaelis, Jochen, International Trade and Unemployment - The Worker‐Selection Effect (May 2014). Review of International Economics, Vol. 22, Issue 2, pp. 226-252, 2014, Available at SSRN: https://ssrn.com/abstract=2419780 or http://dx.doi.org/10.1111/roie.12111

Marco De Pinto (Contact Author)

University of Applied Labour Studies ( email )

Seckenheimer Landstr. 16
Mannheim, 68163
Germany

Jochen Michaelis

University of Kassel - Economics ( email )

Nora-Platiel Str. 4
34109 Kassel
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
383
PlumX Metrics