Trade and Labor Market Outcomes / Elhanan Helpman, Oleg Itskhoki, Stephen Redding.

Format:

Book

Author/Creator:

Helpman, Elhanan.

Contributor:

National Bureau of Economic Research.

Itskhoki, Oleg.

Redding, Stephen.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16662.

NBER working paper series no. w16662

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

This paper reviews a new framework for analyzing the interrelationship between inequality, unemployment, labor market frictions, and foreign trade. This framework emphasizes firm heterogeneity and search and matching frictions in labor markets. It implies that the opening of trade may raise inequality and unemployment, but always raises welfare. Unilateral reductions in labor market frictions increase a country's welfare, can raise or reduce its unemployment rate, yet always hurt the country's trade partner. Unemployment benefits can alleviate the distortions in a country's labor market in some cases but not in others, but they can never implement the constrained Pareto optimal allocation. We characterize the set of optimal policies, which require interventions in product and labor markets.

Notes:

Print version record

January 2011.