Foreign labor costs and domestic employment: What are the spillovers?

• 成果类型: Article
• 署名作者: Dao, Mai Chi
• 署名单位: International Monetary Fund
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2012.06.005
• 发表日期: 2013
• 页码: 154-171
• 关键词: International spillover effects; Terms of trade; unemployment

摘要

This paper studies the international spillover effects of country-specific labor cost changes in the presence of labor market frictions. A two-country model with search frictions predicts that a cut in foreign labor costs leads to an increase in domestic employment, driven by a positive terms of trade effect on job creation. I find empirical evidence in support of this positive spillover effect, the terms of trade channel, and the dependence on the degree of labor market rigidity. This is done by a panel regression that estimates the effect of exogenous variation in foreign unit labor costs, instrumented by changes in foreign statutory social security contribution rates, on domestic employment and output. (C) 2012 Elsevier B.V. All rights reserved.