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International trade and directed search unemployment in general equilibrium
Author(s) -
King Ian,
Stähler Frank
Publication year - 2014
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12082
Subject(s) - economics , unemployment , endowment , general equilibrium theory , capital (architecture) , labour economics , international economics , macroeconomics , history , philosophy , archaeology , epistemology
We develop an open economy general equilibrium model, with auction‐based directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by endowment , trade makes both the unemployment rate and the rental in the capital‐(labour‐) abundant country rise (decline) but does not lead to equalization. If, alternatively, countries differ by technology , trade increases (decreases) the unemployment rate in the country whose technology is relatively superior (inferior) for producing the capital‐intensive good.