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Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing
Author(s) -
Brecher Richard A.,
Chen Zhiqi
Publication year - 2010
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/j.1467-9396.2010.00921.x
Subject(s) - unemployment , economics , outsourcing , labour economics , production (economics) , comparative advantage , full employment , aggregate demand , distribution (mathematics) , macroeconomics , international trade , monetary policy , business , marketing , mathematical analysis , mathematics
Abstract We show how international trade, migration, and outsourcing affect unemployment of skilled and unskilled labor, in a framework that integrates the Heckscher–Ohlin model of trade with the Shapiro–Stiglitz model of unemployment. Our approach allows us to analyze changes in not only aggregate unemployment, but also the distribution of unemployment between skilled and unskilled labor. As the analysis demonstrates, the unemployment rates of these two types of labor often move in opposite directions, thereby dampening the change in aggregate unemployment. Results depend on the source of comparative advantage, based on international differences in (for example) unemployment insurance or production technology.