Journal article
International Trade and Unemployment-the Worker-selection Effect
Publication Details
Authors: | Michaelis, J.; Pinto, M. |
Publication year: | 2014 |
Journal: | Review of International Economics |
Pages range : | 226-252 |
Volume number: | 22 |
Start page: | 226 |
End page: | 252 |
ISSN: | 0965-7576 |
eISSN: | 1467-9396 |
DOI-Link der Erstveröffentlichung: |
Abstract
This paper investigates the labor market effects of trade liberalization. We incorporate trade unions and heterogeneous workers into the Melitz (2003) framework. Workers differ with respect to their abilities. Our main findings are: (i) trade liberalization harms low-ability workers, they loose their job and switch to long-term unemployment (worker-selection effect); (ii) high-ability workers are better off in terms of both higher wages and higher employment; (iii) if a country is endowed with a large fraction of low-ability workers, trade liberalization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a country's welfare. (iv) The overall employment and welfare effect crucially hinges on the characteristics of the wage bargain.
This paper investigates the labor market effects of trade liberalization. We incorporate trade unions and heterogeneous workers into the Melitz (2003) framework. Workers differ with respect to their abilities. Our main findings are: (i) trade liberalization harms low-ability workers, they loose their job and switch to long-term unemployment (worker-selection effect); (ii) high-ability workers are better off in terms of both higher wages and higher employment; (iii) if a country is endowed with a large fraction of low-ability workers, trade liberalization leads to a rise in aggregate unemployment. In this case, trade liberalization may harm a country's welfare. (iv) The overall employment and welfare effect crucially hinges on the characteristics of the wage bargain.
