Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92558
Authors: 
Gaston, Noel
Rajaguru, Gulasekaran
Year of Publication: 
2011
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 801
Abstract: 
Does trade affect the equilibrium rate of unemployment? To theoretically examine this question, we incorporate firm-union bargaining considerations into a model with a booming external sector and a stagnating manufacturing sector. In the model, a sustained improvement in the terms of trade lowers unemployment. To empirically investigate the predicted determinants of the unemployment rate, we use data for Australia, a country whose prosperity has always depended on the value of its exports. We find strong evidence that higher export prices, capital accumulation in tradeable goods industries and a lower unemployment benefit replacement rate each reduce the equilibrium unemployment rate.
Subjects: 
equilibrium unemployment rate
specific factors model
bargaining
mining boom
Dutch disease
JEL: 
E24
F12
J51
Document Type: 
Working Paper

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