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

Xu, Xinpeng; Sheng, Yu


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)...[Show more]

CollectionsANU Research Publications
Date published: 2014
Type: Journal article
Source: Pacific Economic Review
DOI: 10.1111/1468-0106.12060


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