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Labor matching behavior and trade adjustment

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  • Sly, Nicholas
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    Abstract

    This paper develops a model of costly trade and team production to examine the matching behavior of skilled workers in an open economy. Trade liberalization changes the supply of skilled production teams available for hire, even when firm production techniques remain fixed. As trade barriers fall, some workers choose to quit small firms in order to accept less skill intensive jobs at large firms that participate in foreign markets. Changes in worker matching behavior can explain several stylized features of firm-level adjustments to trade, with effects that are not limited to firms on the margin of exit or exporting. Trade is shown to rationalize the matching behavior of workers, leading to aggregate gains in productivity and lower prices. Openness benefits workers employed at exporting firms, however the likelihood of gaining from trade is not necessarily increasing in skill. Wages in the open economy are tied to both worker skill and job type.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Economic Review.

    Volume (Year): 56 (2012)
    Issue (Month): 3 ()
    Pages: 592-604

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    Handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:592-604

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    Web page: http://www.elsevier.com/locate/eer

    Related research

    Keywords: Matching; International trade; Skill-upgrading;

    References

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    Cited by:
    1. Hartmut Egger & Michael Koch, 2013. "Trade and the Firm-Internal Allocation of Workers to Tasks," Working Papers 139, Bavarian Graduate Program in Economics (BGPE).

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