Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26022
Authors: 
Janeba, Eckhard
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 1977
Abstract: 
The paper analyzes the labor market effects of globalization when foreign market entry is costly and risky. With flexible labor markets, a fall in foreign market entry cost tends to generate more income inequality. By contrast, when workers cannot easily switch industries and wages are inflexible in the short run, globalization tends to increase unemployment. In this situation, government unemployment benefits reduce the wages that exporting firm’s need to pay workers as risk compensation. Thus more firms within an industry and more industries become exporters. The above findings are consistent with popular views about the globalization effects in the U.S. and continental Europe. The results also suggest that the welfare state can simultaneously cause an increase in unemployment and exports.
JEL: 
D40
F10
H20
Document Type: 
Working Paper

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