摘要：This paper studies the link between volatility, labor market flexibility, and
international trade. International differences in labor market regulations
affect how firms can adjust to idiosyncratic shocks. These institutional
differences interact with sector specific differences in volatility (the
variance of the firm-specific shocks in a sector) to generate a new source of
comparative advantage. Other things equal, countries with more flexible labor
markets specialize in sectors with higher volatility. Empirical evidence for a
large sample of countries strongly supports this theory: the exports of
countries with more flexible labor markets are biased towards high-volatility
sectors. We show how differences in labor market institutions can be
parsimoniously integrated into the workhorse model of Ricardian comparative
advantage of Dornbush, Fisher and Samuelson (1977). We also show how our model
can be extended to multiple factors of production.
