Export and the Labor Market: a Dynamic Model with on-the-job Search

Suverato, Davide (27. Mai 2014): Export and the Labor Market: a Dynamic Model with on-the-job Search. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2014-20

Abstract

This paper develops a two-sector, two-factor trade model with labor market frictions in which workers search for a job also when they are employed. On the job search (OJS) is a key ingredient to explain the response to trade liberalization of sectoral employment, unemployment and wage inequality. OJS generates wage dispersion and it leads to a reallocation of workers from less productive firms that pay lower wages to more productive ones. Following a trade liberalization the traditional selection effects are more severe than without OJS and the tradable sector experiences a loss of employment, while the opposite is true for the non tradable sector. Starting from autarky, the opening to trade has a positive effect on employment but it increases wage inequality. For an already open economy, a further increase of trade openness can, however, lead to an increase of unemployment. The dynamics of labor market variables is obtained in closed form. The model predicts overshooting at the time of implementation of a trade liberalization, then the paths of adjustment follow a stable transitional dynamics.

• Dokumententyp: Paper
• Keywords: International Trade, Unemployment, Wage Inequality, Firm Dynamics
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: F12, F16, E24
• Sprache: Englisch

Literaturliste

Bernard, A. B., Jensen, J. B., Redding, S. J., and Schott, P. K. (2011). The Empirics of Firm Heterogeneneity and International Trade. Business, pages 1-38.

Bjelland, M., Fallick, B., Haltiwanger, J., and McEntarfer, E. (2011). Employer-to Employer Flows in the United States: Estimates Using Linked Employer-Employee Data. Journal of Business & Economic Statistics, 29(4):493-505.

Burdett, K. and Mortensen, D. (1998). Wage differentials, employer size, and unemployment. International Economic Review, 39(2):257-273.

Cosar, A. K., Guner, N., and Tybout, J. (2010). Firm dynamics, job turnover, and wage distributions in an open economy. NBER Working Paper 16326, National Bureau of Economic Research.

Davis, S., F. R. H. J. (2013). The Establishment-Level Bahavior of Vacancies. The Quarterly Journal of Economics, pages 581-622.

Felbermayr, G., Prat, J., and Schmerer, H.-J. (2011a). Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity. Journal of Economic Theory, 146(1):39-73.

Felbermayr, G., Prat, J., and Schmerer, H.-J. (2011b). Trade and unemployment: What do the data say? European Economic Review, 55(6):741-758.

Goldberg, P. K. and Pavcnik, N. (2007). Distributional Effects of Globalization in Developing Countries. Journal of Economic Literature, 45(1):39-82.

Hall, R. E. and Krueger, A. B. (2012). Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search. American Economic Journal: Macroeconomics, 4(4):56-67.

Helpman, E., Itshoki, O., and Redding, S. (2010). Inequality and unemployment in a global economy. Econometrica, 78(4):1239-1283.

Helpman, E. and Itskhoki, O. (2010). Labour Market Rigidities, Trade and Unemployment. The Review of Economic Studies, 77(3):1100-1137.

Helpman, E., Itskhoki, O., Muendler, M.-A., and Redding, S. J. (2012). Trade and Inequality: From Theory to Estimation.

Melitz, M. J. (2003). The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 71(6):1695-1725.

Melitz, M. J. and Redding, S. J. (2013). Heterogeneous Firms and Trade. Elsevier.

Mortensen, D. T. (2009). Wage Dispersion in the Search and Matching Model with Intra-Firm Bargaining. NBER Working Paper, (June):1-23.

Mortensen, D. T. (2010). Wage Dispersion in the Search and Matching Model. American Economic Review, 100(2):338-42.

Panayotounakos, D. E. and Zarmpoutis, T. I. (2011). Construction of Exact Parametric or Closed Form Solutions of Some Unsolvable Classes of Nonlinear ODEs (Abel's Nonlinear ODEs of the First Kind and Relative Degenerate Equations). International Journal of Mathematics and Mathematical Sciences, 2011:1-13.

Stole, L. A. and Zwiebel, J. (1996). Intra-Firm Bargaining under Non-Binding Contracts. The Review of Economic Studies, 63(3):375-410.

Treffer, D. (2004). The Long and Short of the Canada-U.S. Free Trade Agreement. American Economic Review, 94(4):870-895.

Yashiv, E. (2000). Hiring as Investment Behavior. Review of Economic Dynamics, 3:486- 522.