The Effect of International Trade on Labour-Demand Elasticities: Intersectoral Matters
This paper studies the impact of trade on the price-elasticity of aggregate labour demand. The analysis is based on the idea that a variation in the cost of (a given type of) labour has an effect on the sectoral trade specialisation of an economy, at the expense of the domestic productions using this factor intensively. This is true even when the trade is balanced. As this effect is more important the more open the economy, trade openness induces an increase in the associated labour- demand elasticity, at least if the country has a comparative disadvantage in the industries using intensively the type of labour considered. This argument is illustrated by a simple model, using the Armington hypothesis, with an empirical assessment for France.
International trade; Labour-demand elasticity; Sectoral trade specialisation
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