Essays in Honor of Mordechai Kreinin
Edited by Michael G. Plummer
Chapter 5: Labor Market Structure and its Influence on Trade-Related Outcomes: Some Initial Findings
Carl Davidson and Steven J. Matusz 1. INTRODUCTION The fact that international trade affects labor market outcomes is never debated. It is generally accepted that the pattern of trade influences the composition of employment within a country as well as its wage structure. However, the exact nature of the link between trade and labor market outcomes is often the center of debates. Does trade create or destroy jobs? Does it affect overall employment? Have changes in trade and/or trade policies had a significant impact on the distribution of income? If so, what is the nature of the impact? While tremendous resources have been devoted to these questions, none of them have been truly resolved. There is significant disagreement in the public about trade’s impact on job opportunities and in academic circles there are several recognized theories about the link between trade and wages. Thus the debates continue. In contrast, there has been very little attention paid to the manner in which the structure of the labor market itself affects trade-related outcomes. This is somewhat surprising given that labor market institutions vary greatly across countries. Jobs last longer in Europe and Japan than they last in the United States (Freeman, 1994) and the average duration of unemployment is lower in the US than it is in most European countries. The implication is that labor markets in the US are characterized by greater turnover than their European counterparts (see, for example, Nickell, 1997; Haynes, Upward and Wright, 2000; or Greenaway, Upward and...
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