Trade and search generated unemployment

We argue that trade economists should begin to seriously consider environments in which unemployment is carefully modeled. We introduce such a model, derive several results, and compare them to results derived in full employment models. We argue that some traditional results are probably too narrow (the determinants of comparative advantage) and that some results do not generalize to models with unemployment (the link between trade and income distribution for employed factors). We also show that in some important cases results do generalize (there is an extended Stolper-Samuelson Theorem that links trade to the distribution of income for searching factors) and that our model allows us to address issues that traditional models cannot handle (the impact of trade on unemployment and the welfare of the unemployed). (C) 1999 Elsevier Science B.V. All rights reserved.