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Endogenous labor supply and international trade


  • This paper is based upon Ago et al. (2014). We thank A.A. Batabyal, Y.-L. Cheng, R. Ito, M. Fujita, N. Jinji, K. Kawata, M. Kohara, T. Mori, M. Morikawa, S. Mun, K. Nagamachi, S.-K. Peng, M. Sasaki, H. Takatsuka, D.-Z. Zeng as well as seminar audiences at RIETI, Tohoku University, Kyoto University, Kansai Labor Economics Workshop, Japan Soceity of International Economics in Kansai, Asia Pacific Trade Seminars, Academia Sinica, European Regional Science Association, ARSC annual meeting, and NARSC annual meeting for helpful comments and discussions. This work was supported by RIETI and JSPS KAKENHI: grant numbers 25870925, 15H03348 and 16H03615.


We construct an international trade model with an elastic labor supply and analyze the impacts of technological progress on the equilibrium outcomes of working hours and economic welfare. We show that the labor supply is inverted U-shaped with respect to technological progress. We also show that welfare is U-shaped with respect to trade costs whereas welfare and technological progress are positively related. We then show that working hours in developed countries are longer in the first stages of development, but shorter in the second stages of development.