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The impact of trade openness on labour force participation rate

Madanizadeh, S. A ; Sharif University of Technology | 2019

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  1. Type of Document: Article
  2. DOI: 10.1080/00036846.2018.1558350
  3. Publisher: Routledge , 2019
  4. Abstract:
  5. In this article, we investigate the impact of trade openness on labour force participation rate. We use tariff rate as the main indicator of trade openness and we employ the number of regional trade agreements and the average tariff rate in the neighbours’ countries as instrumental variables to diminish the endogeneity problem of the tariff rate. We find that trade openness increases the participation rate which is economically and statistically significant. The results show that this correlation is robust under controlling for different variables and using various specifications. We find that 10 percentage point increase in tariff rate lowers the participation rate by 4–6 percentage point and this relationship is more severe in the long run. Finally, we show that changes in labour force population accounts for about 27% of changes in the unemployment rate following a trade liberalization. © 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group
  6. Keywords:
  7. International tradelabour force participation ratetrade openness ; Labor participation ; Regional trade ; Tariff structure ; Trade agreement ; Trade liberalization ; Trade openness ; Unemployment
  8. Source: Applied Economics ; Volume 51, Issue 24 , 2019 , Pages 2654-2668 ; 00036846 (ISSN)
  9. URL: https://www.tandfonline.com/doi/abs/10.1080/00036846.2018.1558350?journalCode=raec20