Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2011:25: Globalization and Imperfect Labor Market Sorting

Carl Davidson, Fredrik Heyman, Steven Matusz, Fredrik Sjöholm () and Susan Chun Zhu
Additional contact information
Carl Davidson: Michigan State University
Fredrik Heyman: The Research Institute of Industrial Economics
Steven Matusz: Michigan State University
Fredrik Sjöholm: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Susan Chun Zhu: Michigan State University

Abstract: This paper focuses on the ability of the labor market to correctly match heterogeneous workers to jobs within a given industry and the role that globalization plays in that process. Using matched worker-firm data from Sweden, we find strong evidence that openness improves the matching between workers and firms in industries with greater comparative advantage. This suggests that there may be significant gains from globalization that have not been identified in the past – globalization may improve the efficiency of the matching process in the labor market. These results remain unchanged after adding controls for technical change at the industry level or measures of domestic anti-competitive regulations and product market competition. Our results are also robust to alternative measures of the degree of matching, openness, or the trade status of an industry

Keywords: Matching; Globalization; Firms; Workers; Multinational Enterprises; International Trade

JEL-codes: F14; F16; J20

49 pages, July 15, 2011

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