Trade in Unemployment

57 Pages Posted: 2 Jun 2014

See all articles by Céline Carrère

Céline Carrère

University of Geneva

Marco Fugazza

United Nations - Trade Analysis Branch

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Frederic Robert-Nicoud

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 2014

Abstract

We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade liberalization causes higher unemployment in countries with comparative advantage in sectors with strong labor market frictions and leads to lower unemployment in countries with comparative advantage in sectors with weak labor market frictions. We test this prediction in a panel dataset of 97 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.

Keywords: search unemployment, trade

JEL Classification: F10, F13, F16

Suggested Citation

Carrère, Céline and Fugazza, Marco and Olarreaga, Marcelo and Robert-Nicoud, Frederic L., Trade in Unemployment (March 2014). CEPR Discussion Paper No. DP9916, Available at SSRN: https://ssrn.com/abstract=2444859

Céline Carrère (Contact Author)

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Marco Fugazza

United Nations - Trade Analysis Branch ( email )

Palais des Nations
Office E 8074
Geneva, 1211
Switzerland

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Frederic L. Robert-Nicoud

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland
+41 22 379 8272 (Phone)
+41 22 379 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/staff/robert/home.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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