Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230459
Authors: 
Davis, Colin R.
Hashimoto, Ken-ichi
Year of Publication: 
2019
Series/Report no.: 
ISER Discussion Paper No. 1052
Abstract: 
This paper constructs a two-country model of international trade to study how labor market frictions affect industry location patterns, unemployment rates, and fully endogenous productivity growth. We show that when the larger country offers subsidies to labor search costs or reduces unemployment benefits, the domestic unemployment rate falls, causing greater industry concentration and faster productivity growth, but higher unemployment for the smaller country. When similar labor market policies are implemented in the smaller country, however, the resulting fall in domestic unemployment leads to lower industry concentration and slower productivity growth, while lowering unemployment in the larger country.
Subjects: 
Labor market frictions
Industry location
Imperfect knowledge spillovers
Endogenous productivity growth
JEL: 
E24
J64
O41
R11
Document Type: 
Working Paper

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