Labour market rigidity and trade margins

Countries differ, sometimes significantly, regarding their basic labour market structure. Despite the prevalence of theoretical literature, empirical studies examining impact rigidity (LMR) on trade is sparse. Existing have been limited to aggregate flows with cross-sectional estimations; a set countries (e.g. OECD or Latin America) period after 1990. We utilise gravity model examine LMR exports for 145 between 1964 and 2004. dis-aggregated product-level data decompose total into extensive intensive margin this relationship. also international relative domestic sales, which allows identification LMR-trade relationship, even in presence multilateral resistance controls. Finally, we estimate effect (and margins) by focusing sample European via difference-in-differences estimation. In all cases, find that rigid reduces exports, decrease driven primarily margin. Our findings are relevant as recent found be more important long-run export growth especially developing countries.