International trade and unemployment: Theory and cross-national evidence

Pushan Dutt, Devashish Mitra, Priya Ranjan

Research output: Contribution to journalArticle

104 Scopus citations

Abstract

We present a model of trade and search-induced unemployment, where trade results from Heckscher-Ohlin (H-O) and/or Ricardian comparative advantage. Using cross-country data on trade policy, unemployment, and various controls, and controlling for endogeneity and measurement-error problems, we find fairly strong and robust evidence for the Ricardian prediction that unemployment and trade openness are negatively related. This effect dominates the positive H-O effect of trade openness on unemployment for capital-abundant countries, which turns negative for labor-abundant countries. Using panel data, we find an unemployment-increasing short-run impact of trade liberalization, followed by an unemployment-reducing effect leading to the new steady state.

Original languageEnglish (US)
Pages (from-to)32-44
Number of pages13
JournalJournal of International Economics
Volume78
Issue number1
DOIs
StatePublished - Jun 2009

Keywords

  • Heckscher-Ohlin
  • Ricardian
  • Search
  • Trade
  • Unemployment

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'International trade and unemployment: Theory and cross-national evidence'. Together they form a unique fingerprint.

  • Cite this