For helpful comments and suggestions, we thank Keir Armstrong, Ehsan U. Choudhri, Vivek Dehejia, Hian Teck Hoon, Ngo Van Long, Adrian Wood, Zhihao Yu, Ting Zhang, and seminar participants at Carleton University, University of Manitoba, and University of Waterloo. Chen's research was financially supported by the Social Sciences and Humanities Research Council of Canada.
Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing
Article first published online: 29 OCT 2010
© 2010 Blackwell Publishing Ltd
Review of International Economics
Volume 18, Issue 5, pages 990–1000, November 2010
How to Cite
Brecher, R. A. and Chen, Z. (2010), Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing. Review of International Economics, 18: 990–1000. doi: 10.1111/j.1467-9396.2010.00921.x
- Issue published online: 29 OCT 2010
- Article first published online: 29 OCT 2010
We show how international trade, migration, and outsourcing affect unemployment of skilled and unskilled labor, in a framework that integrates the Heckscher–Ohlin model of trade with the Shapiro–Stiglitz model of unemployment. Our approach allows us to analyze changes in not only aggregate unemployment, but also the distribution of unemployment between skilled and unskilled labor. As the analysis demonstrates, the unemployment rates of these two types of labor often move in opposite directions, thereby dampening the change in aggregate unemployment. Results depend on the source of comparative advantage, based on international differences in (for example) unemployment insurance or production technology.