6.1.2

Trade Openness and Labour-Market Rigidities

Empirical literature on the short-run relationship between trade openness and unemployment is non-existent, and the identification strategies used to examine the causal impact of trade openness on unemployment rarely focus on policy changes. This project seeks to address these issues at both the theoretical and empirical level.

The project will start by trying to combine the different recent developments in the area of trade and unemployment within a tractable general equilibrium trade model. After exploring the predictions in terms of the impact of trade reforms on unemployment at home and in partner countries, we will examine the strategic incentives that countries may have to use labour policies as a substitute for trade policy, providing an analytical framework to analyse the potential substitutability or complementarity between trade and labour policies.

 

The predictions from this framework will be empirically tested based on cross country macro data from the ILO and UNCTAD, as well as household and labour surveys from Switzerland and other developed and developing countries.

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