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Trade and unemployment: What do the data say?

Trade and unemployment: What do the data say?,10.1016/j.euroecorev.2011.02.003,European Economic Review,Gabriel Felbermayr,Julien Prat,Hans-Jörg Schme

Trade and unemployment: What do the data say?   (Citations: 2)
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This paper documents a robust empirical regularity: in the long-run, higher trade openness is associated with a lower structural rate of unemployment. We establish this fact using: (i) panel data from 20 OECD countries, (ii) cross-sectional data on a larger set of countries. The time structure of the panel data allows us to control for unobserved heterogeneity, whereas cross-sectional data make it possible to instrument openness by its geographical component. In both setups, we purge the data of business cycle effects, include a host of institutional and geographical variables, and control for within-country trade. Our main finding is robust to various definitions of unemployment rates and openness measures. Our benchmark specification suggests that a 10 percentage point increase in total trade openness reduces aggregate unemployment by about three quarters of one percentage point.
Journal: European Economic Review - EUR ECON REV , vol. 55, no. 6, pp. 741-758, 2011
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