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Labour market effects of currency appreciation: The case of Switzerland

Author

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  • Peter H. Egger
  • Johannes Schwarzer
  • Anirudh Shingal

Abstract

Recent work on labour market effects of globalization has generated both academic and populist interests. However, this work has focussed exclusively on the manufacturing sector. Moreover, general equilibrium effects of globalization have received little attention. This study contributes to filling both these gaps by examining the general equilibrium effects of external exposure on the labor market in Switzerland. We exploit exogenous exchange rate movements to identify trade-induced shocks across all sectors of the Swiss economy and transpose industry-level exposure to the municipal level, using detailed employment data on the entirety of Swiss firms. We find strong evidence for three channels of employment effects of currency appreciation - negative employment growth induced by increasing export uncompetitiveness and higher import competition, and positive employment growth induced by cheaper availability of foreign inputs. The combined average effect of the three channels on employment is found to be negative in our preferred results, with significant heterogeneity across municipalities.

Suggested Citation

  • Peter H. Egger & Johannes Schwarzer & Anirudh Shingal, 2018. "Labour market effects of currency appreciation: The case of Switzerland," RSCAS Working Papers 2018/30, European University Institute.
    • Handle: RePEc:rsc:rsceui:2018/30
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    References listed on IDEAS

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    2. Twinam, Tate, 2020. "Trade Shocks and Growth: The Impact of the Quartz Crisis in Switzerland," SocArXiv twscm, Center for Open Science.

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    More about this item

    Keywords

    international trade; labour market; exchange rates; global value chains;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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