FDI, skill-specific unemployment, and institutional spillover effects

No 2012-2, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper proposes a multi-industry trade model with integrated capital markets and Mortensen and Pissarides search frictions in the labor market. Institutional changes in the model trigger adjustments at the intensive and extensive margin of labor demand. At the extensive margin a shift of the specialization pattern amongst the integrated countries magnifies the effects at the intensive industry margin via trade and FDI. Moreover, the distinction between high- and low-skill workers facilitates the analysis of skill-specific institutional changes. A government can influence wages and unemployment of the low-skilled by manipulating labor market institutions concerning high-skill workers only. One-sided interventions affect all workers at home and abroad irrespective of their level of skill.

Keywords: FDI; globalization; search unemployment; labor market institutions (search for similar items in EconPapers)
JEL-codes: E24 F16 J6 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-int and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20122

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