Pecuniary Externalities in Labor Markets and Questions in Macroeconomics and International Trade
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CitationSchwarz, Lukas Marinus. 2016. Pecuniary Externalities in Labor Markets and Questions in Macroeconomics and International Trade. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractI analyze how various types of structural change including labor market reform, trade liberalization, product market reform and technological progress affect labor markets in closed and open economies. In order to do this, I propose a model of labor markets which captures frictions and pecuniary externalities as well as different types of labor market reform in a very general way. Embedding this framework into general equilibrium models with imperfect competition in product markets and endogenous entry I find that the strength of pecuniary externalities in labor markets is absolutely crucial: In closed economies sufficiently strong pecuniary externalities in labor markets require “supply-side approaches” to labor market reform to raise aggregate employment, while “demand-side approaches” are required otherwise. Product market deregulation and technological progress raise aggregate employment in closed economies only if pecuniary externalities in labor markets are sufficiently strong. Similar results hold in open economies although terms-of-trade-effects may slightly change the picture depending on their strength. Further, distributional conflicts both within and across countries may arise from those effects, but they can be avoided by means of multilateral coordination. Trade liberalization increases aggregate employment only if pecuniary externalities in labor markets are sufficiently strong. Firm heterogeneity amplifies both gains and losses from trade liberalization. Sufficiently strong pecuniary externalities in labor markets also make positive international spill-overs of unilateral structural change more likely. I present my results in terms of threshold-rules for the strength of pecuniary externalities in labor markets and I provide careful analyses of what determines the size of the threshold for each question I address: Generally, the strengths of product-variety-effects and of a mark-ups-channel working through product markets as well as the importance of the extensive margin of production play a central role, but both the importance of network production structures and of international trade matter, too.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:33493425
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