On the heterogeneous effect of trade on unemployment

Transcript

1 UNCTAD Research Paper No. 22 UNCTAD/SER.RP/2018/4 Carrère Céline GSEM and GSI, University of Geneva, FERDI and, CEPR Marco Fugazza Division on International Trade and Commodities, UNCTAD Marcelo Olarreaga GSEM, University of Geneva and, CEPR Robert- Nicoud Frédéric GSEM, University of Geneva, SERC and, CEPR On the heterogeneous effect of trade on unemployment Abstract This paper tests a series of predictions about the possible relationship between trade and unemployment. Empirical results show that trade reduces unemployment in countries with comparative advantage in sectors with more efficient labour markets and leads to higher unemployment in countries with comparative advantage in sectors with less efficient labour markets. These results are obtained in a panel dataset of 107 countries covering the period They further help reconcile the apparently contradicting evidence in the empirical literature and contrasting political views on the impact of trade on unemployment. JEL classification: F10, F13, F16. Keywords: 2018 United Nations

2 Contents Acknowledgements We are grateful to Nicolas Berman, Lorenzo Caliendo, Alvaro Forteza, Beata Javorcik, Gianmarco Ottaviano, Joao Paulo Pessoa Veronica Rappoport and Mustapha Sadni for their very helpful comments, as well as to various conference and seminar participants for feedback, comments, and suggestions.

3 1. Introduction

4 2. Trade and (un)employment: theoretical insights and empirical evidence 2.1 Trade and unemployment: theory 2.2 Trade and unemployment: empirical evidence

5 2.3 Reconciling theory and empirics

6 3. Empirical strategy ln(u ct ) = β c + β t + β 1 ct + β 2 ln(w/p) ct + ε ct u ct c t ctw/pct ε ct β c β t β 1 β Measuring comparative advantage ln(x cpz ) = α cp + α cz + α pz + ε cpz α cpz x cpz r ctz = e α ctz/σ σ σ r ctz 3.2 Measuring sector level labour market frictions ct

7 L ct L ctz u ctz u ct = 23 z=1 ω czt ω czt L ctz L ct 23 z=1 ω czt = 1 L czt H czt H czt L czt H ct = L ctz = H ctz + L ctz = H czt 1 23 z=1 H ctz u ct 1 u ct = 23 z=1 β z L czt = 23 H czt z=1 1 u ct 23 u ct 1 u ct = 1 H czt ω czt + ε ct z=1 H ct u ct ω ctz H ctz H ct = 1 β z 1 β z uz β z u ctz =

8 3.3 Correlation between labour market frictions and revealed comparative advantage r czt ct 3.4 Identification issues ct u ct u ct ct ct \(c) \(c) ct ct ct 3 4

9 r czt ct u ct ct β czt u czt 1 u czt = β c + β z + β t β c β z ω ctz H czt H ct β t β γ u ct 1 u ct = γ LAMRIG c + u czt = u czt β czt 1 β czt 23 z=1 β z ω czt + β t + ε ct ct 4. Empirical Results 4.1 Baseline estimations 5

10 r czt 4.2 Robustness checks ct s u ct ct β 1 β 2 ct \(c) ct \(c) 6

11 ct ct u ct β 1 5. Discussion β 1 β 1

12 8 8 UNCTAD (2018) provides a general practical framework based on these insights that can serve as a basis for an integrated treatment of trade and employment in policy making.

13 References

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15 Data Appendix Appendix Table: Descriptive statistics

16 Tables and figures Table 1: Sector level labour market frictions ct Table 2: Correlation between labour market frictions and comparative advantage (median for ) Country name Country code (standard error) Russian Federation (the) RUS Romania ROM Cabo Verde CPV Algeria DZA Ukraine UKR The former Yugoslav Republic of Macedonia MKD Croatia HRV

17 Trinidad and Tobago TTO Chile CHL Albania ALB Grenada GRD Cameroon CMR Togo TGO Argentina ARG Comoros (the) COM Venezuela (Bolivarian Republic of) VEN Ghana GHA Brazil BRA Saint Vincent and the Grenadine VCT Nigeria NGA Tunisia TUN Guinea GIN Georgia GEO Burundi BDI Zambia ZMB Côte d'ivoire CIV Slovakia SVK Poland POL Sudan (the) SDN Jamaica JAM Latvia LVA Paraguay PRY Gambia (the) GMB Saint Kitts and Nevis KNA Morocco MAR South Africa ZAF Bulgaria BGR Belize BLZ Groenland GRL United Republic of Tanzania (the) TZA Slovenia SLV Azerbaijan AZE Colombia COL Oman OMN Republic of Moldova (the) MDA Bolivia (Plurinational State of) BOL Rwanda RWA Estonia EST Surinam SUR Maldives MDV Kenya KEN Central African Republic (the) CAF Saudi Arabia SAU Uganda UGA

18 Peru PER Gabon GAB Mongolia MNG Guatemala GTM Senegal SEN Honduras HND Lebannon LBN Indonesia IDN Portugal PRT Nicaragua NIC St. Lucia LCA Egypt EGY Ethiopia ETH Faroe Isl. FRO Macao (China) MAC Uruguay URY Greece GRC Hungary HUN Turkey TUR Cyprus CYP Madagascar MDG India IND Czechia CZE Niger NER Spain ESP Ecuador ECU Polynesia PYF Jordan JOR Burkina Faso BFA Dominica DMA Malawi MWI Lithuania LTU Panama PAN Mali MLI Bangladesh BGD Costa Rica CRI Belgium BEL Barbados BRB Andorra AND Slovenia SVN Luxembourg LUX France FRA Seychelles SYC Netherlands (the) NLD Austria AUT Norway NOR Mexico MEX

19 Australia AUS Italy ITA Iceland ISL Finland FIN China CHN United Kingdom GBR Canada CAN New Zealand NZL Germany DEU Thailand THA Mauritius MUS Malta MLT Sweden SWE Philippines (the) PHL Republic of Korea (the) KOR United States of America (the) USA Singapore SGP Ireland IRL Malaysia MYS Switzerland CHE Japan JPN Denmark DNK Hong Kong (China) HKG Israel ISR Table 3: Trade and unemployment (benchmark estimations) r czt r czt

20 Table 4: Trade and unemployment (robustness estimations) r czt r czt Table 5: Trade and unemployment (using country and time-varying u czt ) r czt r czt

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