بیکاری و نهادهای بازار کار نسبی بین شرکای تجاری

This paper contributes to the literature that highlights the role of trading partners' institutions for a country's unemployment rate. The objective is to study whether the results established in the minimum wage–setting of Davis (1998) hold when unemployment is driven by search frictions. This paper finds that relative labor market institutions matter for equilibrium unemployment as they generate comparative advantages, but there are two main differences with Davis. With North–North trade, unemployment decreases in the low-regulation country. When South is brought into the picture, low-regulation North is not insulated, and unemployment increases in both developed countries as a result of specialization.

The impact of labor market institutions on unemployment is generally assessed without taking into account increasing international economic linkages between countries. Despite globalization, most researchers focus on domestic labor market regulation to explain differences in unemployment rates both across countries and through time. This choice is motivated by theories of unemployment based on job search frictions, according to which more stringent domestic labor market regulation raises unemployment, an explanation herein referred to as the “regulation view“. In doing so, the effect of foreign labor market institutions on domestic unemployment is thus ignored.

There is ample evidence that a country's labor market institutions are important determinants of unemployment, either directly or through the propagation of shocks. This paper contributes to the growing awareness that, with globalization, the institutions of trading partners matter also for a country's equilibrium unemployment rate. Because labor market institutions affect relative prices, they contribute to comparative advantages and boost or weaken demand for labor-intensive goods depending on differences in labor market regulations between countries. When labor markets work perfectly, wages adjust to ensure full employment. In contrast, in the presence of rigidities, shifts in sectoral demands affect unemployment. Consequently, trade might magnify the consequences of the institutional setting on total employment.16