DP15049 Can export promotion reduce unemployment?
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.
