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Trade and labor market dynamics: What do we learn from the data?

Author

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  • Nordmeier, Daniela
  • Schmerer, Hans-Jörg
  • Weber, Enzo

Abstract

Recent studies in international trade highlight potential labor market effects of trade liberalization through firm selection. Our empirical study contributes to this recent strand of literature by studying the short- and long-run effects of trade on unemployment in Germany. We employ a structural VAR approach in order to disentangle the total effect of trade on unemployment into job-findings and separations. Our results indicate that the unemployment effect mainly works through a drop in the job-separation rate, which can be explained by job-to-job transitions from contracting towards expanding firms. Thus, our results reinforce the importance of endogenous separations and on-the-job search in models of trade, heterogeneous firms and labor market frictions.

Suggested Citation

  • Nordmeier, Daniela & Schmerer, Hans-Jörg & Weber, Enzo, 2016. "Trade and labor market dynamics: What do we learn from the data?," Economics Letters, Elsevier, vol. 145(C), pages 206-209.
    • Handle: RePEc:eee:ecolet:v:145:y:2016:i:c:p:206-209
    DOI: 10.1016/j.econlet.2016.06.007
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    References listed on IDEAS

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    1. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
    4. Rahn, Daniela & Weber, Enzo, 2019. "Patterns Of Unemployment Dynamics In Germany," Macroeconomic Dynamics, Cambridge University Press, vol. 23(1), pages 322-357, January.
    5. Weber, Enzo, 2009. "Common and uncommon sources of growth in Asia Pacific," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 20-36, March.
    6. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    7. Christian Holzner & Mario Larch, 2011. "Capacity Constraining Labor Market Frictions in a Global Economy," CESifo Working Paper Series 3597, CESifo.
    8. Nordmeier, Daniela, 2014. "Worker flows in Germany: Inspecting the time aggregation bias," Labour Economics, Elsevier, vol. 28(C), pages 70-83.
    9. Nordmeier, Daniela & Weber, Enzo, 2013. "Conditional Patterns of Unemployment Dynamics in Germany," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79958, Verein für Socialpolitik / German Economic Association.
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    Citations

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    Cited by:

    1. Hutter, Christian & Klinger, Sabine & Trenkler, Carsten & Weber, Enzo, 2019. "Which factors are behind Germany's labour market upswing?," IAB-Discussion Paper 201920, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Mina Baliamoune, 2022. "Trade and Youth Labor Market Outcomes: Empirical Evidence and Policy Implications," Research papers & Policy papers on Economic Trends and Policies 2201, Policy Center for the New South.
    3. Christian Hutter & Francesco Carbonero & Sabine Klinger & Carsten Trenkler & Enzo Weber, 2022. "Which factors were behind Germany's labour market upswing? A data‐driven approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(5), pages 1052-1076, October.
    4. Dimitrios Bakas & Karen Jackson & Georgios Magkonis, 2020. "Trade (Dis)integration: The Sudden Death of NAFTA," Open Economies Review, Springer, vol. 31(4), pages 931-943, September.
    5. Zhenshan Yang & Xunhaoyue Zeng, 2019. "Envisioning the Impact of the Belt and Road Initiative on Regional Labor Markets," Sustainability, MDPI, vol. 11(8), pages 1-17, April.
    6. repec:ocp:rpaper:pp-0222 is not listed on IDEAS
    7. repec:ocp:rpecon:pp_02-22 is not listed on IDEAS

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    More about this item

    Keywords

    Exports; Worker flows; Transition rates; Cointegrated SVAR model;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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