Working Paper: NBER ID: w19492
Authors: Pablo D. Fajgelbaum
Abstract: I study the aggregate effects of labor market frictions in a small open economy where firms grow slowly and make fixed export investments. The model features interactions between dynamic investments in exporting and search frictions with job-to-job mobility. A calibration to Argentina's economy matching data on firm growth, worker transitions between firms, and export dynamics suggests that the real income gains from lowering frictions in job-to-job transitions are about 7 times larger than comparable reductions in frictions from unemployment. Barriers to worker mobility across firms matter for the real income gains of trade-cost reductions.
Keywords: labor market frictions; firm growth; international trade; export investments; income per worker
JEL Codes: D92; F16; J62; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower frictions in job-to-job transitions (J62) | real income gains (E25) |
| increase in the contact rate of employed workers (J29) | income per employed worker (J39) |
| increase in the contact rate of unemployed workers (J68) | income per employed worker (J39) |
| frictions in hiring from unemployment (J63) | general equilibrium adjustments (D50) |
| frictions in hiring employed workers (J63) | firm growth and export entry (F23) |
| reforms reducing labor market rigidity (J48) | income per worker (J31) |