While most standard economic models of international trade assume full employment, Carl Davidson and Steven Matusz have argued over the past two decades that this reliance on full-employment modeling is misleading and ill-equipped to tackle many important trade-related questions. This book brings together the authors' pioneering work in creating models that more accurately reflect the real-world connections between international trade and labor markets.


The material collected here presents the theoretical and empirical foundations of equilibrium unemployment modeling, which the authors and their collaborators developed to give researchers and policymakers a more realistic picture of how international trade affects labor markets, and of how transnational differences in labor markets affect international trade. They address the shortcomings of standard models, describe the empirics that underlie equilibrium unemployment models, and illustrate how these new models can yield vital insights into the relationship between international trade and employment. This volume also includes an indispensable general introduction as well as concise section introductions that put the authors' work in context and reveal the thinking behind their ideas.


Economists are only now realizing just how important these ideas are, making this book essential reading for researchers and students.

"The pathbreaking research synthesized in this volume shows that labor market frictions are central to understanding the distributional consequences of international trade. Anyone interested in the intellectual debate about globalization should read this book. It is an essential reference for researchers and students in international trade."--Stephen J. Redding, London School of Economics and Political Science

"Davidson and Matusz pioneered the modern theory of international trade with labor market frictions. This book knits together their major work on this subject, and delivers fundamental insights concerning the effects of globalization on unemployment patterns, wage distributions, adjustment burdens, intergenerational welfare gaps, and trade policy formation. Any serious study of this literature should begin with this volume."--James R. Tybout, Pennsylvania State University

"This is an important and timely volume. The quality of scholarship in these papers is of a consistently high standard, and readers will not only find the individual papers analytically rich but also accessible. The economics profession has finally recognized just what a central issue trade with unemployment is--Davidson and Matusz recognized it twenty years ago and have been building tractable models that have yielded important insights."--David Greenaway, University of Nottingham

"The pathbreaking research synthesized in this volume shows that labor market frictions are central to understanding the distributional consequences of international trade. Anyone interested in the intellectual debate about globalization should read this book. It is an essential reference for researchers and students in international trade."-Stephen J. Redding, London School of Economics and Political Science