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Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing

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  • Richard A. Brecher
  • Zhiqi Chen

Abstract

We show how international trade, migration, and outsourcing affect unemployment of skilled and unskilled labor, in a framework that integrates the Heckscher–Ohlin model of trade with the Shapiro–Stiglitz model of unemployment. Our approach allows us to analyze changes in not only aggregate unemployment, but also the distribution of unemployment between skilled and unskilled labor. As the analysis demonstrates, the unemployment rates of these two types of labor often move in opposite directions, thereby dampening the change in aggregate unemployment. Results depend on the source of comparative advantage, based on international differences in (for example) unemployment insurance or production technology.

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  • Richard A. Brecher & Zhiqi Chen, 2010. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 990-1000, November.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:5:p:990-1000
    DOI: 10.1111/j.1467-9396.2010.00921.x
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    Cited by:

    1. Haiwen Zhou, 2018. "Impact of international trade on unemployment under oligopoly," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(4), pages 365-379, May.
    2. Alan V. Deardorff, 2016. "Local Import Competition in a Lumpy Country," Working Papers 653, Research Seminar in International Economics, University of Michigan.
    3. Haiwen Zhou, 2023. "Impact of international trade under dual labor markets," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 917-934, October.
    4. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    5. Richard A. Brecher & Zhiqi Chen & Zhihao Yu, 2013. "The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment," The World Economy, Wiley Blackwell, vol. 36(1), pages 1-11, January.
    6. Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
    7. Richard A. Brecher & Zhiqi Chen, 2014. "Unemployment and welfare consequences of international outsourcing under monopolistic competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 540-554, May.
    8. Haiwen Zhou, 2015. "Unemployment and Economic Integration for Developing Countries," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(4), pages 664-690, December.
    9. Elias Dinopoulos & Theofanis Tsoulouhas, 2016. "Performance Pay and Offshoring," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 334-369, April.
    10. Lukas Mohler & Rolf Weder & Simone Wyss, 2018. "International trade and unemployment: towards an investigation of the Swiss case," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-12, December.
    11. Heid, Benedikt & Larch, Mario, 2012. "Migration, trade and unemployment," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-40.
    12. Lei Wen & Haiwen Zhou, 2020. "Technology Choice, Financial Sector and Economic Integration Under the Presence of Efficiency Wages," Open Economies Review, Springer, vol. 31(1), pages 95-112, February.
    13. Judyta Kabus & Michał Dziadkiewicz & Ireneusz Miciuła & Marcin Mastalerz, 2022. "Using Outsourcing Services in Manufacturing Companies," Resources, MDPI, vol. 11(3), pages 1-20, March.

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