Labour Market Effects of Currency Appreciation: The Case of Switzerland

47 Pages Posted: 1 Jul 2018

See all articles by Peter H. Egger

Peter H. Egger

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; ETH Zurich; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Johannes Schwarzer

Council on Economic Policies

Anirudh Shingal

S.P. Jain Institute of Management & Research; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Bern - World Trade Institute

Date Written: June 2018

Abstract

Recent work on labour market effects of globalization has generated both academic and populist interests. However, this work has focussed exclusively on the manufacturing sector. Moreover, general equilibrium effects of globalization have received little attention. This study contributes to filling both these gaps by examining the general equilibrium effects of external exposure on the labor market in Switzerland. We exploit exogenous exchange rate movements to identify trade-induced shocks across all sectors of the Swiss economy and transpose industry-level exposure to the municipal level, using detailed employment data on the entirety of Swiss firms. We find strong evidence for three channels of employment effects of currency appreciation - negative employment growth induced by increasing export uncompetitiveness and higher import competition, and positive employment growth induced by cheaper availability of foreign inputs. The combined average effect of the three channels on employment is found to be negative in our preferred results, with significant heterogeneity across municipalities.

Keywords: international trade, labour market, exchange rates, global value chains

JEL Classification: F10, F14

Suggested Citation

Egger, Peter H. and Schwarzer, Johannes and Shingal, Anirudh, Labour Market Effects of Currency Appreciation: The Case of Switzerland (June 2018). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2018/30, Available at SSRN: https://ssrn.com/abstract=3195816 or http://dx.doi.org/10.2139/ssrn.3195816

Peter H. Egger (Contact Author)

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )

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ETH Zurich ( email )

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Switzerland

Ludwig-Maximilians University of Munich

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Munich, 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Johannes Schwarzer

Council on Economic Policies ( email )

Zurich
Switzerland

Anirudh Shingal

S.P. Jain Institute of Management & Research ( email )

Munshi Nagar, Dadabhai Road
Andheri West
Mumbai, Maharashtra 119579
India

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

University of Bern - World Trade Institute ( email )

Hallerstrasse 6/8
Bern, 3012
Switzerland

HOME PAGE: http://www.nccr-trade.org

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