IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_1977.html
   My bibliography  Save this paper

Exports, Unemployment and the Welfare State

Author

Listed:
  • Eckhard Janeba

Abstract

The paper analyzes the labor market effects of globalization when foreign market entry is costly and risky. With flexible labor markets, a fall in foreign market entry cost tends to generate more income inequality. By contrast, when workers cannot easily switch industries and wages are inflexible in the short run, globalization tends to increase unemployment. In this situation, government unemployment benefits reduce the wages that exporting firm’s need to pay workers as risk compensation. Thus more firms within an industry and more industries become exporters. The above findings are consistent with popular views about the globalization effects in the U.S. and continental Europe. The results also suggest that the welfare state can simultaneously cause an increase in unemployment and exports.

Suggested Citation

  • Eckhard Janeba, 2007. "Exports, Unemployment and the Welfare State," CESifo Working Paper Series 1977, CESifo.
    • Handle: RePEc:ces:ceswps:_1977
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1977.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Molana, Hassan & Montagna, Catia, 2006. "Aggregate scale economies, market integration, and optimal welfare state policy," Journal of International Economics, Elsevier, vol. 69(2), pages 321-340, July.
    2. Francisco Requena Silvente, 2005. "Price Discrimination and Market Power in Export Markets: The Case of the Ceramic Tile Industry," Journal of Applied Economics, Taylor & Francis Journals, vol. 8(2), pages 347-370, November.
    3. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    4. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    5. Fernandez, Raquel, 1992. "Terms-of-Trade Uncertainty, Incomplete Markets and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 881-894, November.
    6. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
    7. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306, World Scientific Publishing Co. Pte. Ltd..
    8. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    9. Hartmut Egger & Udo Kreickemeier, 2017. "International Fragmentation: Boon or Bane for Domestic Employment?," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 9, pages 237-263, World Scientific Publishing Co. Pte. Ltd..
    10. Chi-Chur Chao & Eden S. H. Yu, 1997. "Trade Liberalization in Oligopolistic Competition with Unemployment: A General Equilibrium Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 479-496, May.
    11. Matusz, Steven J, 1986. "Implicit Contracts, Unemployment and International Trade," Economic Journal, Royal Economic Society, vol. 96(382), pages 307-322, June.
    12. Goldberg, Pinelopi Koujianou & Knetter, Michael M., 1999. "Measuring the intensity of competition in export markets," Journal of International Economics, Elsevier, vol. 47(1), pages 27-60, February.
    13. Thelen,Kathleen, 2004. "How Institutions Evolve," Cambridge Books, Cambridge University Press, number 9780521546744, January.
    14. Francesca Fabbri & Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Does Nationality Of Ownership Matter For Labor Demands?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 698-707, 04/05.
    15. Stanley Fischer, 2003. "Globalization and Its Challenges," American Economic Review, American Economic Association, vol. 93(2), pages 1-30, May.
    16. Eckhard Janeba, 2009. "Exports, unemployment, and the welfare state," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 930-955, August.
    17. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-785, September.
    18. Hans‐Werner Sinn, 2006. "The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle," The World Economy, Wiley Blackwell, vol. 29(9), pages 1157-1175, September.
    19. Udo Kreickemeier & Douglas Nelson, 2017. "Fair Wages, Unemployment, and Technological Change in a Global Economy," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 8, pages 205-235, World Scientific Publishing Co. Pte. Ltd..
    20. 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.
    21. Girma, Sourafel & Greenaway, David & Kneller, Richard, 2003. "Export market exit and performance dynamics: a causality analysis of matched firms," Economics Letters, Elsevier, vol. 80(2), pages 181-187, August.
    22. Hungerford, Thomas L, 1995. "International Trade, Comparative Advantage and the Incidence of Layoff Unemployment Spells," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 511-521, August.
    23. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    24. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
    25. J. Peter Neary, 2003. "Presidential Address: Globalization and Market Structure," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 245-271, 04/05.
    26. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank.
    27. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
    28. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 98-116.
    29. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    30. Thelen,Kathleen, 2004. "How Institutions Evolve," Cambridge Books, Cambridge University Press, number 9780521837682, January.
    31. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amegashie, J. Atsu & Ouattara, Bazoumanna & Strobl, Eric, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," MPRA Paper 3158, University Library of Munich, Germany, revised 06 May 2007.
    2. Eckhard Janeba, 2009. "Exports, unemployment, and the welfare state," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 930-955, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:got:cegedp:60 is not listed on IDEAS
    2. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    3. Hartmut Egger & Peter Egger & James R. Markusen, 2012. "International Welfare And Employment Linkages Arising From Minimum Wages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 771-790, August.
    4. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    5. Michael Koch, 2016. "Skills, Tasks and the Scarcity of Talent in a Global Economy," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 536-563, August.
    6. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Trade and Labor Market Outcomes," CEP Discussion Papers dp1028, Centre for Economic Performance, LSE.
    7. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.
    8. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306, World Scientific Publishing Co. Pte. Ltd..
    9. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 1100-1137.
    10. repec:gnv:wpaper:unige:77631 is not listed on IDEAS
    11. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    12. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    13. Céline Carrère & Anja Grujovic & Frédéric Robert-Nicoud, 2020. "Trade and Frictional Unemployment in the Global Economy," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 2869-2921.
    14. Aida Caldera, 2010. "Innovation and exporting: evidence from Spanish manufacturing firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(4), pages 657-689, December.
    15. Sly, Nicholas, 2010. "Skill Acquisition, Incentive Contracts and Jobs: Labor Market Adjustment to Trade," MPRA Paper 25004, University Library of Munich, Germany.
    16. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, May.
    17. Ricardo A. López, 2009. "Do Firms Increase Productivity in Order to Become Exporters?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 621-642, October.
    18. Dinopoulos, Elias & Unel, Bulent, 2015. "Entrepreneurs, jobs, and trade," European Economic Review, Elsevier, vol. 79(C), pages 93-112.
    19. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    20. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, vol. 84(1), pages 26-36, May.
    21. Egger, Hartmut & Egger, Peter & Kreickemeier, Udo, 2013. "Trade, wages, and profits," European Economic Review, Elsevier, vol. 64(C), pages 332-350.
    22. Muendler, Marc-Andreas, 2007. "Labor Reallocation in Response to Trade Reform," University of California at San Diego, Economics Working Paper Series qt3cm38535, Department of Economics, UC San Diego.

    More about this item

    Keywords

    income inequality; unemployment; exporters; beachhead cost; globalization;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F1 - International Economics - - Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1977. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.