Working Paper

Job creation, job destruction, and international competition: a literature review

Abstract: This paper is a chapter in our forthcoming monograph, Job Creation, Job Destruction, and International Competition (W.E. Upjohn Institute, 2003), and expands on the ideas advanced in Klein, Schuh, and Triest (2003). The chapter provides an extensive review of the literature that studies the connection between international factors, such as real exchange rates and trade agreements, and the domestic labor market. Until recently, the literature has focused on the effects of international factors on net employment at aggregate levels or in selected import-competing industries. In the long run, aggregate net employment largely is unaffected by international factors, whereas these factors have important allocative effects in the short and long run, both between and within detailed industries. Thus, it is appropriate to study the components of net employment - gross job creation and destruction - when measuring the impact of international factors on labor markets. Examining gross job and worker turnover associated with changes in international factors raises questions about the accuracy of prior estimates of adjustment costs associated with international factors because gross flows are an order of magnitude larger than net employment flows.

Keywords: Employment (Economic theory); Unemployment; Foreign exchange rates; Labor turnover; Labor market;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Working Papers

Publication Date: 2002

Number: 02-7