Trade and Frictional Unemployment in the Global Economy

Celine Carrere, Anja Grujovic-Vischer and Frederic Robert-Nicoud

SERC Discussion Papers from Centre for Economic Performance, LSE

Abstract: We develop a multi-country, multi-sector trade model with labor market frictions and equilibrium unemployment. Trade opening leads to a reduction in unemployment if it raises real wages and reallocates labor towards sectors with lower-than-average labor market frictions. We estimate sector-specific labor market frictions and trade elasticities using employment data from 25 OECD countries and worldwide trade data. We then quantify the potential unemployment and real wage effects of implementing the Transatlantic Trade and Investment Partnership (TTIP) or the Trans-Pacific Partnership (TPP), and of eliminating trade imbalances worldwide The unemployment and real wage effects work in conflicting directions for some countries under some trade regimes, such as the US under TTIP. We introduce a welfare criterion that accounts for both effects and splits such ties. Accordingly, US welfare is predicted to decrease under TTIP and increase under TPP.

Keywords: labor market frictions; unemployment; trade (search for similar items in EconPapers)
JEL-codes: F15 F16 F17 J64 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-int and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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http://cep.lse.ac.uk/pubs/download/sercdp0189.pdf (application/pdf)

Related works:
Journal Article: Trade and Frictional Unemployment in the Global Economy (2020)
Working Paper: Trade and frictional unemployment in the global economy (2019)
Working Paper: Trade and frictional unemployment in the global economy (2015)
Working Paper: Trade and frictional unemployment in the global economy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:sercdp:0189

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