scholarly journals How preferences shape the welfare and employment effects of trade

2021 ◽  
Author(s):  
Hartmut Egger ◽  
Simone Habermeyer
Keyword(s):  
Labor Market ◽  
Open Economy ◽  
Welfare Effects ◽  
Wage Bargaining ◽  
Production Factor ◽  
Firm Level ◽  
Trade Model ◽  
Differentiated Goods ◽  
Competitive Labor Market ◽  
Homogeneous Good

AbstractWe set up a trade model with two countries, two sectors, and one production factor, which features a home-market effect due to the existence of trade costs. We consider search frictions and firm-level wage bargaining in the sector producing differentiated goods and a perfectly competitive labor market in the sector producing a homogeneous good. Consumers have price-independent generalized-linear preferences over the two types of goods, covering homothetic and quasi-homothetic preferences as two limiting cases. Due to the specific functional forms of indirect utility, homothetic preferences lead to risk aversion, while quasi-homothetic preferences lead to risk neutrality in our model. We show that trade between two countries that differ in their population size leads to an expansion of the differentiated goods sector and a contraction of the homogeneous good sector in the larger economy. This induces the larger country to net-export differentiated goods at the cost of a higher economy-wide rate of unemployment in the open economy (with the effects reversed for the smaller country). The welfare effects of trade depend on the preference structure. Looking at the two limiting cases, we show that the larger country is likely to benefit from trade if preferences are homothetic, whereas losses from trade are possible if preferences are quasi-homothetic. The opposite is true in the smaller country. This reveals an important role of preferences for the welfare effects of trade in the presence of labor market imperfection, a result we further elaborate on by considering more general preferences as well as differences of countries in their per-capita income levels.

scholarly journals Trade credit, trade income elasticity and the international transmission of shocks

2021 ◽  
Author(s):  
Anna Watson
Keyword(s):  
International Trade ◽  
Open Economy ◽  
Trade Credit ◽  
Income Elasticity ◽  
Heterogeneous Firms ◽  
Firm Level ◽  
Macroeconomic Shocks ◽  
Cyclical Fluctuations ◽  
Irish Data ◽  
The Impact

AbstractThe paper examines the impact of trade credit on cyclical fluctuations in international trade. It provides new empirical evidence based on firm-level UK and Irish data showing that exporters use trade credit more actively and intensively than non-exporters. The study introduces inter-firm lending into an open economy general equilibrium model with heterogeneous firms and endogenous entry into the exports market. It demonstrates that trade credit amplifies the impact of macroeconomic shocks on international trade both along the intensive and extensive margins and that it significantly contributes to the high trade income elasticity observed in the data.

Implications of the Energy Transition on Employment: Today’s Results, Tomorrow’s Needs

2021 ◽  
Author(s):  
Pauline Ravillard ◽  
J. Enrique Chueca ◽  
Mariana Weiss ◽  
Michelle Carvalho Metanias Hallack
Keyword(s):  
Energy Efficiency ◽  
Labor Market ◽  
Gender Gap ◽  
Demand Management ◽  
Energy Transition ◽  
Recovery Phase ◽  
Employment Creation ◽  
Firm Level ◽  
Market Structures ◽  
And Training

As countries progress in their energy transitions, new investments have the potential to create employment. This is crucial, as countries enter their post-pandemic recovery phase. An opportunity also arises to close the gender gap in the energy sector. However, how much will need to be invested, how many jobs will be created, and for whom, remain empirical questions. Little is also known about the needs of each country and their sectors in terms of future skills and training. The present work sheds light on these questions by carrying out a harmonized firm-level survey on employment in Chile, Uruguay, and Bolivia. Findings are manifold. First, firms in emerging sectors such as energy efficiency, electric mobility, battery, storage, hydrogen, and demand management, create more direct jobs than generation firms, including renewables. Second, these firms also have the potential to create employment that is local, permanent, and direct. Finally, they can contribute to closing the gender gap. However, this employment creation will not come on its own and will not be equal between countries. It will require improving the workforces qualifications and considering each countrys labor market and market structures specificities.

scholarly journals On the Incentives to Increase Input Efficiency under Monopoly Trade Unions

2012 ◽  
Vol 4 (1) ◽  
pp. 39-51
Author(s):  
Tapan Biswas ◽  
Jolian McHardy
Keyword(s):  
Labor Market ◽  
Minimum Wage ◽  
Trade Unions ◽  
Utility Functions ◽  
Elasticity Of Substitution ◽  
Cournot Duopoly ◽  
Technological Improvement ◽  
Input Efficiency ◽  
Competitive Labor Market

We examine the effects of and the incentives for increasing input efficiency within a spatially segregated  Cournot duopoly with monopoly trade unions whose utility functions depend on both wages and employment. We show that with neoclassical as well as Leontief technology, unions raise wages to appropriate fully the gains from labor-saving technological (or organisational) improvements, leaving the firm with no incentive to invest in increasing the efficiency of workers. However, capital-saving     technological improvement may be profitable depending on the elasticity of substitution. Finally, we examine the implication of a fixed minimum wage (or competitive labor market) in one country.

Coping with Firms

2020 ◽  
pp. 293-326
Author(s):  
Jean-Philippe Robé
Keyword(s):  
Climate Change ◽  
Open Economy ◽  
Negative Externalities ◽  
Firm Level ◽  
Economic Decisions ◽  
World Power ◽  
The World ◽  
Full Picture ◽  
Accounting Rules ◽  
The Impact

The Chapter addresses the need to cope with firms as participants in the World Power System. « Agency theory » has led to biased firm governance. The bias extends to accounting rules which do not provide a full picture of the impact of a firm’s operations and actually prevents firms from adapting their ways to the requirements of today’s predicament. Addressing world issues such as climate change requires the making of decisions to change our ways of producing, travelling and consuming. In an open economy, the competition among large business firms derivatively leads to a race to the bottom among States to offer firms accommodating legal environments. This limits the States’ ability to internalize negative externalities and to redistribute income. Given the inherent defects of our divided State System, it is at the firm level that governmental rules must be developed so that firms consider the consequences of their activities to a larger extend than they do today. Economic decisions within organizations are made on the basis of the accounting of their operations. To change the decisions they make, we need to amend the ways organizations account for their operations.

scholarly journals Cointegration and Structure in Norwegian Wage–Price Dynamics

Econometrics ◽  
2020 ◽  
Vol 8 (3) ◽  
pp. 29
Author(s):  
Marit Gjelsvik ◽  
Ragnar Nymoen ◽  
Victoria Sparrman
Keyword(s):  
Open Economy ◽  
Manufacturing Industry ◽  
Small Open Economy ◽  
Simultaneous Equation ◽  
Wage Bargaining ◽  
Cointegration Analysis ◽  
Macroeconomic Stabilization ◽  
Wage Formation ◽  
Equation Modelling ◽  
Simultaneous Equation Modelling

Wage coordination plays an important role in macroeconomic stabilization. Pattern wage bargaining systems have been common in Europe, but in different forms, and with different degrees of success in terms of actual coordination reached. We focus on wage formation in Norway, a small open economy, where it is custom to regard the manufacturing industry as the wage leader. We estimate a model of wage formation in manufacturing and in two other sectors. Deciding cointegration rank is an important step in the analysis, economically as well statistically. In combination with simultaneous equation modelling, the cointegration analysis provides evidence that collective wage negotiations in manufacturing have defined wage norms for the rest of the economy over the period 1980(1)–2014(4).

scholarly journals Trade and Frictional Unemployment in the Global Economy

2020 ◽  
Vol 18 (6) ◽  
pp. 2869-2921 ◽  
Author(s):  
Céline Carrère ◽  
Anja Grujovic ◽  
Frédéric Robert-Nicoud
Keyword(s):  
United States ◽  
Labor Market ◽  
Global Economy ◽  
The United States ◽  
Market Frictions ◽  
Unemployment Benefits ◽  
Trade Model ◽  
Labor Market Frictions ◽  
Trade Opening ◽  
Employment Data

Abstract We develop a multicountry, multisector trade model featuring risk-averse workers, labor market frictions, unemployment benefits, and equilibrium unemployment. Trade opening leads to a reduction in unemployment when it simultaneously raises welfare and reallocates labor toward sectors with lower-than-average labor market frictions. We then estimate and calibrate the model using employment data from 31 OECD countries and worldwide trade data. Finally, we quantify the potential unemployment, real wage, and welfare effects of repealing NAFTA and raising bilateral tariffs between the United States and Mexico to 20%. This policy would increase unemployment by 2.4% in the United States and 48% in Mexico.

Predicting Labor Market Competition: Leveraging Interfirm Network and Employee Skills

2020 ◽  
Vol 31 (4) ◽  
pp. 1443-1466
Author(s):  
Yuanyang Liu ◽  
Gautam Pant ◽  
Olivia R. L. Sheng
Keyword(s):  
Human Capital ◽  
Labor Market ◽  
Market Competition ◽  
Customer Relationship ◽  
Two Dimensional ◽  
Strategic Decisions ◽  
Firm Level ◽  
Public Firms ◽  
Competitor Analysis ◽  
Interfirm Network

Human capital is a key component of the knowledge economy. Firms compete not only for consumers in the product market but also for human capital in the labor market. In this study, we perform an interfirm labor market competitor analysis using the online profiles of more than 89,000 employees and their career histories that span more than 3,000 public firms. Using these profiles, we characterize firms through the granular skill distribution of their employees. Also, using employee migrations across firms, we derive and analyze a human capital flow (HCF) network. Such information allows us to measure the interfirm human capital overlap in terms of similarity in their employees’ skills and HCF network structure. We show that our proposed human capital overlap metrics have superior predictive power over conventional firm-level measures in predicting future labor market competitors. We further demonstrate how our proposed metrics and the prediction framework can be incorporated into a comprehensive two-dimensional competitor analysis that includes both product and labor overlap between firms. By evaluating interfirm relationships in the product and labor markets simultaneously, this two-dimensional competitor analysis framework can help managers make strategic decisions beyond human resources, such as product development and customer relationship management.

Market and Institutional Determinants of Wage Differentiation in Russia

ILR Review ◽  
2002 ◽  
Vol 55 (4) ◽  
pp. 628-648 ◽  
Author(s):  
Simon Clarke
Keyword(s):  
Labor Market ◽  
World Bank ◽  
Wage Inequality ◽  
Institutional Economics ◽  
Industrial Relations ◽  
Wage Determination ◽  
Market Theory ◽  
Institutional Determinants ◽  
Competitive Labor Market

Using a range of official and survey data, the author evaluates the relative success of two approaches—competitive labor market theory and industrial relations theory/institutional economics—in explaining wage determination in Russia. Following a review of the analysis of wage determination by an influential team of World Bank economists, the author shows that increased wage inequality in Russia is dominated by inequality within occupational categories within local labor markets. Such inequality, he suggests, is primarily associated with inter-firm differences in wage levels, rather than barriers to labor mobility or differences in “human capital.” Such a pattern of differentiation entirely accords with the analyses of those institutional economists and industrial relations theorists who stress the role of the wage in regulating and motivating the labor force above its role in securing labor market equilibrium. The paper concludes by outlining the institutional framework of wage determination that underlies the observed results.

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