Terms of trade shocks and endogenous search unemployment: A two-sector model with non-traded goods

Xinpeng Xu, Yu Sheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

1 Citation (Scopus)

Abstract

We develop a simple and tractable two-sector search model featuring a non-traded sector and endogenous search unemployment to examine the impact of terms of trade shocks on unemployment. We show that changes in terms of trade will not only lead to employment reallocation across sectors, as in the traditional trade models, but, more importantly, impact upon search unemployment within each sector. Specifically, we show that an improvement (deterioration) of terms of trade reduces (increases) unemployment rates in both traded and non-traded sectors.
Original languageEnglish
Pages (from-to)201-215
Number of pages15
JournalPacific Economic Review
Volume19
Issue number2
DOIs
Publication statusPublished - 1 Jan 2014

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Aerospace Engineering

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