Premium
The Effect of International Trade on Labor‐Demand Elasticities: Intersectoral Matters
Author(s) -
Jean Sébastien
Publication year - 2000
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00238
Subject(s) - economics , openness to experience , elasticity of substitution , price elasticity of demand , labor demand , elasticity (physics) , comparative advantage , labour economics , macroeconomics , international trade , production (economics) , wage , microeconomics , psychology , social psychology , materials science , composite material
This paper studies the impact of trade on the price‐elasticity of aggregate labor demand, based on the idea that a variation in the cost of (a given type of) labor has an effect on the sectoral trade specialization of an economy, at the expense of the domestic productions using this factor intensively, even when the trade balance is kept unchanged. As this effect is more important the more open the economy, trade openness induces an increase in the associated labor‐demand elasticity, at least if the country has a comparative disadvantage in the industries using intensively the type of labor considered. This argument is illustrated by a simple model, based on an Armington hypothesis, with an empirical assessment for France.