Volatility , Labor Market Flexibility , and the Pattern of Comparative Advantage

@inproceedings{Cunat2006VolatilityL,
  title={Volatility , Labor Market Flexibility , and the Pattern of Comparative Advantage},
  author={Alejandro Cun͂at},
  year={2006}
}
This paper studies the link between volatility, labor market flexibility, and international trade. International differences in labor market regulations affect how firms can adjust to idiosyncratic shocks. These institutional differences interact with sector specific differences in volatility (the variance of the firm-specific shocks in a sector) to generate a new source of comparative advantage. Other things equal, countries with more flexible labor markets specialize in sectors with higher… CONTINUE READING
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