Job creation, job destruction, and the real exchange rate

Welfare gains from trade are reduced by adjustment costs associated with factor reallocation, but most studies of the effects of trade on labor markets focus only on net employment change. This paper takes a step toward identifying trade-related adjustment costs by estimating the effects of real exc...

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Bibliographic Details
Published in:Journal of international economics 2003-03, Vol.59 (2), p.239-265
Main Authors: Klein, Michael W., Schuh, Scott, Triest, Robert K.
Format: Article
Language:English
Subjects:
Adjustment costs
Economic models
Economics
Employment
Employment creation
Exchange rates
Foreign exchange rates
Gross job flows
International economics
International trade
Job creation
Labor market
Labour market
Openness
Real exchange rates
Studies
Trade
Welfare
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Summary:Welfare gains from trade are reduced by adjustment costs associated with factor reallocation, but most studies of the effects of trade on labor markets focus only on net employment change. This paper takes a step toward identifying trade-related adjustment costs by estimating the effects of real exchange rates on labor reallocation using a new model of gross job creation and destruction applied to detailed U.S. manufacturing industries between 1973 and 1993. Trend real exchange rates significantly affect job reallocation but not net employment. Cyclical real exchange rates significantly affect net employment through job destruction only.
ISSN:0022-1996
1873-0353
DOI:10.1016/S0022-1996(02)00022-3