International Trade and Unemployment: On the Redistribution of Trade Gains When Firms Matter

121 Pages·2013·1.249 MB·English

by  Marco de Pinto (auth.)

Contributions to Economics
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•
Marco de Pinto
International Trade
and Unemployment
On the Redistribution of Trade Gains
When Firms Matter
MarcodePinto
IAAEU&UniversityofTrier
Trier
Germany
DissertationattheUniversityofKassel,FacultyofEconomicsandManagement,
DateoftheDefense:18.06.2012
InternationalTradeandUnemployment:ATheoreticalAnalysis
ISSN1431-1933
ISBN978-3-642-33235-7 ISBN978-3-642-33236-4(eBook)
DOI10.1007/978-3-642-33236-4
SpringerHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2012953275
(cid:2)c Springer-VerlagBerlinHeidelberg2013
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Acknowledgments
Crossingthe“finishline”ofmydissertationprojectwouldneverhavebeenpossible
withoutthegreatsupportofmycolleagues,friendsandfamily.Mostofall,Iwould
like to thank my supervisor Jochen Michaelis. It’s due to him that I first even
thought about writing a dissertation, and once I accepted the challenge, he gave
me the opportunity to work at his chair, which is no doubt a time that I always
appreciated.Duringthewholedissertationproject,Ireceivedveryhelpfulcomments
andsuggestionsfromhim,allimprovingmyownresearch.Furthermore,I didnot
onlylearnfromhimhowtodealwith thechallengesofthe economicresearch,he
had also a great part in my professional development in general. So, once again,
thankyouverymuch,Jochen,forallyoursupportandmanyinspiringdiscussions.
I am also deeply grateful to very helpful comments from Hartmut Egger,
Ju¨rgen Meckl, Carsten Eckel, Rainer Voßkamp, Michael Bra¨uninger, Georg von
Wangenheim and Bjo¨rn Frank. Thanks are also due to participants at confer-
ences in Vienna (FIW Research Conference 2012), Go¨ttingen (Workshop on
InternationalEconomics2012and2011),Hamburg(HWWI DoctoralColloquium
2012), Oslo (EEA 2011), Kassel (Colloquium Law and Economics 2010) and
Rauischholzhausen(MAGKSdoctoralcolloquium2010).
I had the privilege to work in an environment with not only outstanding
researchopportunitiesbutalsowithamagnificentatmosphere.Forthispurpose,my
supervisorbearsresponsibilityonlyinpart.Thewholeteam,namelyHeikeMinich,
UlrichZierahn,BenjaminSchwanebeck,JakobPalek,Lisa-MarieWarthaandHeike
Kro¨nung,createstheextraordinaryworkingenvironmentandIamverygratefulto
allofthem;frommypersonalexperienceIcanconfirmthattherearepositivespill-
overeffectsfromtheteamspirittotheacademicresearchoutput.Overtheboundary
ofthechair-team,IalsowouldliketothankmycolleaguesandfriendsMalteLassen,
ChristophBu¨hrenandSha Li– Ienjoyedourlunchandcoffeebreaksallthetime
andalsothepokergames.
Mydissertationwouldalsoneverhavebeenfinishediftherewerenoneofthese
importantpersonsinmylifewhoareabletogivemetheneededpowerandbelief.
IamverygratefultoDennisandJulia–IlovedourFridayeveningappointments–,
Tine,Andi,UteandWolfgang–Ienjoyedandalwayswillourestablishedweekly
v
vi Acknowledgments
meetings so much –, Thomas and Kristin – thanks for all the fantastic weekends
inHamburg–andSusiandMirabai.Iamextremelythankfultohaveafamilythat
holds together in any cases. Thank you, Mom and Dad, Nico, Michi, Mulle and
Grandfather,forallyoursupportandlove.Finally,andmostimportant,Iwouldlike
tothankSarahforherlove,empathyandbelief.Sarah,youmeaneverythingtome!
Contents
1 Motivation .................................................................... 1
2 InternationalTradeandUnemployment:
TheWorker-SelectionEffect................................................ 5
2.1 Introduction ............................................................. 5
2.2 Model.................................................................... 8
2.2.1 Set-Up........................................................... 8
2.2.2 LaborDemand.................................................. 11
2.2.3 WageBargainingandFallbackIncome........................ 11
2.2.4 UnionMembership,VacancyPosting
andtheMelitzLottery .......................................... 14
2.3 GeneralEquilibrium .................................................... 16
2.3.1 AverageProductivityandAggregation........................ 16
2.3.2 Equilibrium (Long-Term)Unemployment,
WelfareandWageDistribution ................................ 17
2.4 OpenEconomy.......................................................... 21
2.4.1 Modifications ................................................... 21
2.4.2 AutarkyVersusTrade:MacroeconomicImplications......... 23
2.5 TradeLiberalization..................................................... 26
2.6 Conclusion .............................................................. 28
Appendix ...................................................................... 29
A.1 Appendix1...................................................... 29
A.2 Appendix2...................................................... 30
A.3 Appendix3...................................................... 31
A.4 Appendix4...................................................... 31
3 Unemployment Benefits as Redistribution Scheme
forTradeGains:APositiveAnalysis ...................................... 33
3.1 Introduction ............................................................. 33
3.2 Model.................................................................... 36
3.2.1 Set-Up........................................................... 36
3.2.2 Labordemand................................................... 40
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viii Contents
3.2.3 MonopolyUnionandFallbackIncome........................ 41
3.2.4 UnionMembership,VacancyPosting
andtheMelitzLottery .......................................... 44
3.3 GeneralEquilibrium .................................................... 47
3.3.1 AverageProductivityandAggregation........................ 47
3.3.2 FirmEntryandExit............................................. 50
3.3.3 Equilibrium(Long-Term)UnemploymentandWelfare ...... 52
3.4 TheGovernment’sPolicyInstruments................................. 53
3.4.1 UnemploymentBenefits........................................ 54
3.4.2 TheWageTax................................................... 55
3.4.3 ThePayrollTax................................................. 55
3.4.4 TheProfitTax................................................... 56
3.5 TheRedistributionSchemes............................................ 59
3.5.1 TheGovernment’sBudgetConstraint ......................... 59
3.5.2 Calibration ...................................................... 60
3.5.3 SimulationResults.............................................. 61
3.6 Conclusion .............................................................. 67
Appendix ...................................................................... 68
A.1 Appendix1:GovernmentSector............................... 68
A.2 Appendix2:DerivationoftheGeneralEquilibrium.......... 69
4 AnOptimalRedistributionSchemeforTradeGains.................... 71
4.1 Introduction ............................................................. 71
4.2 Model.................................................................... 74
4.2.1 Set-Up........................................................... 74
4.2.2 LaborDemand.................................................. 77
4.2.3 UnionWageSetting ............................................ 78
4.2.4 UnionMembership,VacancyPosting
andtheMelitzLottery .......................................... 80
4.3 GeneralEquilibrium .................................................... 84
4.3.1 AverageProductivityandAggregation........................ 84
4.3.2 FirmEntryandExit............................................. 87
4.3.3 Equilibrium(Long-Term)UnemploymentandOutput ....... 88
4.4 TheGovernment’sOptimizationProblem............................. 90
4.4.1 TheObjectiveFunction......................................... 90
4.4.2 GiniCoefficient................................................. 91
4.5 OptimalRedistributionSchemes....................................... 95
4.5.1 Calibration ...................................................... 95
4.5.2 LocalOptima.................................................... 97
4.5.3 GlobalOptimum................................................ 104
4.6 Conclusion .............................................................. 105
Appendix ...................................................................... 105
A.1 Appendix1:GovernmentSector............................... 105
A.2 Appendix2:DerivationoftheGeneralEquilibrium.......... 106
A.3 Appendix3:DerivationoftheLorenzCurve.................. 107
References......................................................................... 109
List of Figures
Fig.3.1 Tradeliberalization.................................................... 62
Fig.3.2 GainsoftradedestructionI–UBandthewagetax ................. 63
Fig.3.3 GainsoftradedestructionII–UBandthepayrolltax .............. 64
Fig.3.4 GainsoftradedestructionIII–UBandtheprofittax ............... 65
Fig.4.1 ThelocaloptimumofRS1 ........................................... 98
Fig.4.2 ThelocaloptimumofRS2 ........................................... 100
Fig.4.3 ThelocaloptimumofRS3 ........................................... 102
Fig.4.4 TheoptimalRS........................................................ 104
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