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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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1935-1682
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Volume 11, Issue 1 (Apr 2011)

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Comparative Advantage and Skill-Specific Unemployment

Mario Larch / Wolfgang Lechthaler
Published Online: 2011-04-14 | DOI: https://doi.org/10.2202/1935-1682.2673

Abstract

We introduce unemployment and endogenous selection of workers into different skill-classes in a trade model with two sectors and heterogeneous firms. This allows us to identify three different channels through which trade liberalization can affect unemployment: specialization, changes in productivity, and mobility. These three channels may work in opposite directions and their relative importance depends on the type of trade (intra-industry trade vs. inter-industry trade) and the skill-class of a worker.

We show that the gains from trade are distributed very unequally. When a skilled worker abundant country opens up to trade with a country that is unskilled worker abundant, the biggest losers are the skilled workers in the import sector in the skill abundant country. However, average unemployment among skilled workers goes down, while average unemployment among unskilled workers goes up.

This article offers supplementary material which is provided at the end of the article.

Keywords: comparative advantage; heterogeneous firms; labor market frictions; unemployment; trade liberalization

About the article

Published Online: 2011-04-14


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2673.

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©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston. Copyright Clearance Center

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