On the Heterogeneous Effect of Trade on Unemployment

45 Pages Posted: 3 Oct 2016

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: September 2016

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 reduces unemployment in countries with comparative advantage in sectors with more efficient labor markets and leads to higher unemployment in countries with comparative advantage in sectors with less efficient labor markets. We test this prediction in a panel dataset of 107 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 frictions, Trade, Unemployment

JEL Classification: F10, F13, F16

Suggested Citation

Carrère, Céline and Fugazza, Marco and Olarreaga, Marcelo and Robert-Nicoud, Frederic L., On the Heterogeneous Effect of Trade on Unemployment (September 2016). CEPR Discussion Paper No. DP11540, Available at SSRN: https://ssrn.com/abstract=2847074

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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