Trade-Induced Job Turnover and Unemployment
Restricted (Penn State Only)
- Author:
- Firooz, Hamid
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 06, 2019
- Committee Members:
- James R. Tybout, Dissertation Advisor/Co-Advisor
Russell Wade Cooper, Committee Chair/Co-Chair
Stephen Ross Yeaple, Committee Member
Jonathan Eaton, Committee Member
Douglas Harvey Wrenn, II, Outside Member - Keywords:
- Trade liberalization
job turnover
unemployment
variable demand elasticity
Colombia - Abstract:
- This dissertation develops and estimates an open economy dynamic general equilibrium model to introduce and quantify a new mechanism through which openness influences productivity. The model features matching frictions in the labor market and endogenous demand elasticities in product markets. Because openness affects demand elasticities, it influences productivity through several channels. First, higher demand elasticities make firms' employment decisions more responsive to their idiosyncratic productivity shocks. This causes aggregate job turnover to rise, and thereby tends to raise unemployment. Second, this same increase in job turnover means that workers are moved more frequently from less to more efficient firms. Finally, to the extent that openness reduces the cross-firm dispersion in markups, it likewise tends to reduce the distortionary wedges between firms' marginal revenue products. Counterfactual analysis quantifies these trade-induced impacts on job turnover, unemployment, and labor misallocation. I show that a 10 percentage point reduction in import tariffs combined with a 12 percent reduction in the iceberg trade cost raises job turnover and unemployment (in steady state) by roughly 7 and 12 percent, respectively. These effects would be almost four times smaller if demand elasticities were not allowed to respond to openness.