Arnold, Lutz G. (2002) On the Growth Effects of North-South Trade: The Role of Labor Market Flexibility. Journal of International Economics 58 (2), pp. 451-466.
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This paper examines the impact of intensified North–South intra-industry trade from a growth theoretic perspective. It incorporates unemployment into Helpman’s [Econometrica 61 (1993) 1247] model of North–South trade. We assume that those Northern workers who lose their jobs due to imitation remain unemployed for a given (expected) length of time, so that imitation in the South causes frictional unemployment. It is shown that the shape of the relation between the (exogenous) rate of imitation and the (endogenous) steady-state growth rate depends on the degree of labor market flexibility, as measured by the outflow rate from unemployment. It is monotonically increasing for high outflow rates, hump-shaped for intermediate outflow rates, and monotonically decreasing for low outflow rates. The realization of the potential growth gains from trade thus presupposes labor market flexibility, and the model is capable of accounting qualitatively for the divergent growth performances in the US and Europe in the recent past.
|Institutions:||Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Theoretische Volkswirtschaft (Prof. Dr. Lutz Arnold)|
|Keywords:||North–South trade; Endogenous growth; Labor market flexibility|
|Subjects:||300 Social sciences > 330 Economics|
|Refereed:||Yes, this version has been refereed|
|Created at the University of Regensburg:||Unknown|
|Deposited On:||28 Jun 2010 08:33|
|Last Modified:||28 Jun 2010 08:33|
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