DP15049 Can export promotion reduce unemployment?

Author(s): Marcelo Olarreaga, Cristian Ugarte
Publication Date: July 2020
Keyword(s): comparative advantage, Export Promotion, unemployment
JEL(s): F13, F14, O19
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15049

The paper examines the impact of export promotion on aggregate unemployment. We findnd that increases in the share of Export Promotion Agencies' (EPAs) budgets on total exports lead to small decreases in aggregate unemployment. This effect is amplifi ed when export promotion efforts are concentrated in sectors in which the country has a comparative advantage. On the other hand, when EPAs aim at reducing aggregate unemployment by focusing their efforts in sectors with high levels of unemployment, then aggregate unemployment increases. These results suggest that even if EPAs' pri- orities were to shift towards reducing unemployment, this would be better addressed by focusing on sectors in which the country has a comparative advantage rather than sectors with high labor market frictions.