Delay and dynamics in labor market adjustment: Simulation results
We simulate numerically a trade model with labor mobility costs added, modeled in such a way as to generate gross flows in excess of net flows. Adjustment to a trade shock can be slow with plausible parameter values. In our base case, the economy moves 95% of the distance to the new steady state in approximately eight years. Gross flows have a large effect on this rate of adjustment and on the normative effects of trade. Announcing and delaying the liberalization can build - or destroy - a constituency for free trade. We study the conditions under which these contrasting outcomes occur.
Year of publication: |
2008
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Authors: | Artuç, Erhan ; Chaudhuri, Shubham ; McLaren, John |
Published in: |
Journal of International Economics. - Elsevier, ISSN 0022-1996. - Vol. 75.2008, 1, p. 1-13
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Publisher: |
Elsevier |
Keywords: | Labor mobility Gross flows Net flows Gradualism Trade shocks Trade liberalization |
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