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Trade between symmetric countries, heterogeneous firms, and the skill premium

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  • Gonzague Vannoorenberghe

Abstract

This paper examines the effects of trade liberalization between symmetric countries on the skill premium. I introduce skilled and unskilled labour in a model of trade with heterogeneous firms à la Melitz (2003) and assume a production technology such that more productive firms are more skill intensive. I show that the effects of trade liberalization on wage inequality crucially depend on the type of trade costs considered and on their initial size. While fixed costs of trade have a potentially non-monotonic effect on the skill premium, a drop in variable trade costs unambiguously and substantially raises wage inequality.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 44 (2011)
Issue (Month): 1 (February)
Pages: 148-170

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Handle: RePEc:cje:issued:v:44:y:2011:i:1:p:148-170

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Cited by:
  1. James Harrigan & Ariell Reshef, 2011. "Skill Biased Heterogeneous Firms, Trade Liberalization, and the Skill Premium," NBER Working Papers 17604, National Bureau of Economic Research, Inc.
  2. Mauro Caselli, 2010. "Trade, skill-biased technical change and wages in Mexican manufacturing," Economics Series Working Papers CSAE WPS/2010-28, University of Oxford, Department of Economics.
  3. Hiroyuki Kasahara & Yawen Liang & Joel Rodrigue, 2013. "Does Importing Intermediates Increase the Demand for Skilled Workers? Plant-level Evidence from Indonesia," CESifo Working Paper Series 4463, CESifo Group Munich.
  4. Julian Emami Namini & Ricardo Lopez, 2012. "Factor Price Overshooting with Trade Liberalization: Theory and Evidence," Working Papers 52, Brandeis University, Department of Economics and International Businesss School.
  5. Crozet, Matthieu & Trionfetti, Federico, 2013. "Firm-level comparative advantage," Journal of International Economics, Elsevier, vol. 91(2), pages 321-328.
  6. Emami Namini, Julian & Facchini, Giovanni & López, Ricardo A., 2013. "Export growth and firm survival," Economics Letters, Elsevier, vol. 120(3), pages 481-486.
  7. Engelmann, Sabine, 2011. "Trade liberalisation, technical change and skill-specific unemployment," IAB Discussion Paper 201119, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Ferguson, Shon, 2012. "Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D," Working Paper Series 930, Research Institute of Industrial Economics.
  9. Mauro Caselli, 2010. "Trade liberalisation, skill-biased technical change and wages in developing countries: a model with heterogeneous firms," Economics Series Working Papers CSAE WPS/2010-27, University of Oxford, Department of Economics.
  10. Catia Montagna & Antonella Nocco, 2012. "Trade Costs, International Competition and Selection: The Effects of Unionisation on Market Size," Dundee Discussion Papers in Economics 269, Economic Studies, University of Dundee.
  11. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers 16459, National Bureau of Economic Research, Inc.

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