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Trade and long-term unemployment: A quantitative assessment

Presented atDynamics, Economic Growth, and International Trade Conference XIX - Working Papers, Vanderbilt (United States), 26-28 September 2014, p. 1-5
Publication date2014
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 frictions
  • Unemployment
  • Trade
Citation (ISO format)
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.
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  • PID : unige:46746
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