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Trade and long-term unemployment: A quantitative assessment

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Presented at Dynamics, Economic Growth, and International Trade Conference XIX - Working Papers. Vanderbilt (United States) - 26-28 September 2014 - . 2014, p. 1-5
Abstract We develop a multi-country, multi-sector, gravity model with trade frictions in the wake of Eaton and Kortum (2002) and Costinot, Donaldson and Komunjer (2012), which allows for labour market frictions as per Diamond-Mortensen-Pissarides and long-term equilibrium unemployment level as in Helpman and Itskhoki (2010). We find that trade liberalisation may lead to a rise in unemployment if it results in labour reallocation towards sectors with higher-than-average labour market frictions. We calibrate the model using panel trade data and estimated sector-specific labour market frictions to evaluate the employment and welfare effects of the potential Transatlantic Trade and Investment Partnership (TTIP) on US and EU employment rates.
Keywords Labour market frictionsUnemploymentTrade
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CARRERE, Céline, ROBERT-NICOUD, Frédéric, GRUJOVIC, Anja. Trade and long-term unemployment: A quantitative assessment. In: Dynamics, Economic Growth, and International Trade Conference XIX - Working Papers. Vanderbilt (United States). 2014. 1-5 p. https://archive-ouverte.unige.ch/unige:46746

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Deposited on : 2015-02-17

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